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Abatement of IRS Penalties


Abatement of IRS Penalties – When the IRS sends a notice proposing additional taxes, it usually adds penalties and interest.  Penalties are authorized for things like filing your return late, paying your taxes late, where you are found to owe additional taxes, or have failed to file all required forms.


The IRS can remove or reduce a penalty if the taxpayer can establish reasonable cause.  Reasonable cause relief is generally granted when the taxpayer exercises ordinary business care and prudence in determining their tax obligations but nevertheless failed to comply with those obligations.  What constitutes reasonable cause can be very subjective and is dependent upon the unique facts and circumstances of each situation. The IRS can impose an accuracy-related penalty equal to 20% of the amount of the understatement of tax on a return.  This is sometimes referred to as a negligence penalty or a substantial understatement penalty. Generally the substantial understatement penalty is reduced by that portion of the understatement for which there is or was substantial authority for the taxpayer's taking that position.  In situations where the IRS has asserted a substantial understatement penalty, it is important to have a competent tax advisor carefully consider whether there exists substantial authority for part or all of the understatement.


We have considerable successful experience in working with taxpayers in requesting abatement of penalties from the IRS.  We would be happy to work with you to explore whether there may be a basis for requesting the abatement of penalties that have been assessed against you.  As with any notice received from the IRS, it is extremely important to respond to that notice on or before the due date set forth in that notice to maximize your chances for a successful resolution of the matter.


We can also assist you in attempting to obtain an abatement of interest the IRS has charged.  Unfortunately, the tax code authorizes the abatement of interest only in limited circumstances, most of which involve errors or inaction on the part of the IRS.  

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