Penalty Abatement

Several questions of penalty abatement come into play when someone owes the IRS. Probably the number one asked question by clients would be, "What are my chances of penalty abatement?" The answer: Statistics show 13% when looking at numbers, and 41% of penalty dollars are abated. It is more accurate to look at the numbers because most penalty dollars are abated because statutes expire. In actuality, clients have a 5-10% chance of abatement, but 99% of that chance is where clients paid their taxes first.

In order to even be considered for penalty abatement, one has to have reasonable cause. "A self-imposed compliance coupled with a one-time incident with reasonable cause is the best form of penalty abatement." The most abatable forms of penalties are failure to file and failure to deposit (employee tax). Some criteria for reasonable cause for failure to file and failure to pay penalties are:

• Medical Condition(s) that does not allow you to file/pay your taxes
• Reliance on a tax professional
• An Act of God that occurred to cause a hardship that did not allow the client to comply
• Loss or theft or records
• Client was the victim of a crime

Finally, of the utmost importance, ignorance is NOT a defense!