How to Get Tax Penalties Waived
If you submit taxes late or don't pay them in full, the IRS often charges penalties that can quickly add up and become a major expense. In extenuating circumstances such as illness, death or other situations beyond your control, you may be eligible for a tax penalty abatement. Filing for an abatement is a detailed process, but it may prevent you from paying large penalties.
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Instructions
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Confirm that you qualify for a penalty abatement. Review your situation for common qualifications, including an inability to pay due to a serious illness or drug or alcohol abuse, the death of a family member, tax records destroyed in a fire or flood, lack of funds or inability to pay for other specific reasons beyond your control. Check for external factors that impair your ability to pay, including working with a tax accountant who improperly filed your taxes, incorrect information offered by the IRS or a nonresponse to tax questions, or an incorrect W-2 or 1099 submitted by your employer.
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Write a letter to the IRS as soon as you receive a notice of penalties from the IRS. Explain your situation completely, asking that any penalties be removed. Emphasize that you acted prudently in this matter; if you've never requested an abatement before, mention this. Fill out IRS Form 843, available online or by mail, if you would prefer this option to writing a letter.
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Enclose supporting documents with your letter or form. Request a letter from your medical provider, include a bank statement showing your lack of funds, proof of unemployment, death certificate, fire report or other records. Enclose copies of letters or other correspondence with the IRS if it gave you incorrect advice. Make copies of all evidence and your letter.
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Mail your letter, supporting documents and the penalty notice you received from the IRS to the IRS campus where you sent your taxes. Include a check for payment of the tax portion of your bill if possible; don't include the penalty payment.
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Respond to the IRS's decision if your penalty abatement request is denied. Choose one of the following options. Write and submit a protest or appeal letter detailing why your request is reasonable and emphasize that you can or have provided proof for why you couldn't pay on time. Ask that your IRS file be sent to your local IRS office, make an appointment with a local IRS officer and meet with the officer in person to explain why your penalties should be abated. Pay the penalties and request a refund from the IRS by filing Form 843 and attaching the letter you used for your abatement request.
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Submit an offer in compromise to reduce your penalty. Complete IRS Form 656, fill in the amount you're willing or able to pay and send it to the IRS. Note that offers in compromise may be a lengthy process that require documentation similar to that in the abatement request. Appeals may be necessary.
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References
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