How to Reduce IRS Penalties

Avoid tax penalties with the IRS.

The Internal Revenue Service (IRS) assesses a variety of penalties on taxpayers who fail to adhere to IRS rules and guidelines. Two of the most common types of penalties are the Failure to File and Failure to Pay penalties. However, there are other penalties associated with estimated tax, excise tax and gift tax. Fortunately, reducing or eliminating penalties is possible if you complete the proper paperwork, call the IRS or write to them.

Instructions

1. Mail the IRS Form 843 (Claim for Refund and Request for Abatement) to request a refund of all penalties assessed on your unpaid tax. Refer to irs.gov if you are not sure which office processes returns for your area. Often, the IRS will allow a one-time abatement for taxpayers who have a history of filing timely tax returns. If you are not compliant or this is not your first such request, then you need to provide the IRS with a reasonable cause as to why you were unable to pay the tax for which you've been assessed a penalty. A reasonable cause can include but is not limited to: illness, incarceration or military service. You will then check the third box in Section 5 of IRS Form 843. Also, include a detailed explanation in Section 7 of your Form 843 or attach a detailed explanation of the events that prevented you from paying the tax on time and, therefore, caused the penalty.

2. Call the IRS at 1-800-829-1040 to request removal of the penalties assessed on your unpaid tax. Typically, the IRS customer service representative will ask you a series of questions after which she will decide whether the penalties can be reduced or removed altogether. In most instances, the IRS representative can reduce at least a partial amount of your penalty assessment.

3. Write the IRS requesting that your penalties be reduced or removed. By writing the IRS directly, you can provide a full account of the circumstances that prevented you from paying the unpaid tax on time and in full by the due date. This is most beneficial if you are requesting an abatement of penalties based on a natural disaster or if IRS tax law provides an exception in your particular instance.

References

• Internal Revenue Service: Form 843
• Internal Revenue Service: IRS Notices and Bills, Penalties and Interest Charges
• Internal Revenue Service: Penalty Appeal Online Self Help Tool

Resources

• Internal Revenue Service: Contact My Local Office