IRS Amnesty of Penalties

Although the Internal Revenue Service (IRS) does not extend any amnesty period for the assessment of penalties and interest charges, it often offers an abatement or complete dismissal of penalties and interest when the taxpayer shows that he had reasonable cause to commit the action that led to the assessment of the penalty and associated interest.

Reasonable Cause

An abatement for penalties is provided for in the Internal Revenue Code of the United States in the case of "reasonable cause." The IRS, which initially arbitrates abatement requests, does not provide a formal definition of this term, although it is usually considered an event that would make a rational individual act in the manner that caused him to incur the IRS assessed penalty. Common events that have been considered reasonable cause include the death of a family member, hospitalization of the taxpayer or spouse or inaccurate advice provided by a tax professional.

Form 843

Taxpayers who have been assessed a penalty may formally request an abatement using IRS Form 843 (Claim for Refund and Request for Abatement). This form asks the taxpayer to identify the penalties and interest which she wishes the IRS to abate and to then provide a formal written explanation of the event that resulted in the assessment of the tax penalty. When a tax penalty is abated or dismissed, all associated interest is typically removed with the penalty.

Written Request

The IRS does not mandate that taxpayers request an abatement by using Form 843. Taxpayers may also request an abatement by drafting and signing a request to the IRS. Taxpayers drafting a request for abatement should include all pertinent information requested in Form 843, particularly information identifying the specific amount the taxpayer wishes to be abated and information about the event that caused the taxpayer to incur the penalty.

Satisfaction of Obligations

It is generally helpful for the taxpayer to show that he attempted to satisfy all IRS obligations as quickly as reasonably possible. For example, the IRS is much more likely to abate a failure to file penalty if an individual tax return is filed one day late on April 16th rather than three months late on July 16th. The same applies to payments due the IRS. The IRS becomes less lenient the later the payment is remitted.

References

• Internal Revenue Service: Form 843, Claim for Refund and Request for Abatement
• Internal Revenue Service: Instructions Form 843, Claim for Refund and Request for Abatement
• Internal Revenue Service: Publication 17: Your Federal Income Tax
• Internal Revenue Service: Information About Your Notice, Penalty and Interest