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I am requesting an abatement of penalties totaling $2,345.20 as asserted in the IRS Notice dated 6/2/XX, of which I have enclosed.
The reason I paid late, filed late, did not report income (choose your reason) was that __________(fill in your reason, such as:)
My husband passed away
I was hospitalized
My tax records were lost in the hurricane
Whatever your good reason is....
Enclosed is a (describe your supporting documentation, such as):
Death certificate confirming my husband’s death
Doctor’s explanation for my hospitalization
Picture of house torn apart from hurricane
I have also enclosed payment that covers the amount of the underlying taxes I owe. (It is a good idea to send at least something as a good faith deposit).
Please abate these penalties for “reasonable cause.” If you have any further questions, please feel free to contact me at 960-985-8564 from 8a to 5 pm.
Thank you in advance for your time and consideration.
Sincerely,
Manual signature
Jane Nutsy
Enclosed: IRS Tax Notice, death certificate, doctor’s letter, photograph.
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Reasonable Cause Needed For Penalty Abatements
DebtHelp.com Tip: You will not automatically be given a penalty abatement. You must show the IRS reasonable cause as to why your penalty should be either reduced or totally eliminated.
According to the IRS, there are seven categories in which your ‘reasonable cause’ can fall into. Another term for ‘reasonable cause’ is a good reason.
Civil disturbance
Serious illness of either you or a family member
Death of a family member or yourself
Unavoidable absence
Lack of funds – only after you have shown you were using ordinary care and prudence in your business operations
Reasons beyond your control that caused the inability to determine your tax
Other reasons for not complying within the time limit. You still must show the IRS that you exercised ordinary business care, however.
You also may request a penalty abatement when you rely on incorrect advice given by the IRS over the phone. As a result of relying on the IRS phone advice, you suffered more taxes and penalties, for instance. Your reliance upon the advice, however, must be reasonable. You must show the IRS this.
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Taxpayer Bill Of Rights & Penalty Abatement
One of the rights you have under this IRS statute is the fact your penalties can be waived. In order to have your penalty waived (abated), however, you need to show the IRS that you acted reasonably and in good faith. Or, you must show you relied on an IRS employee’s incorrect advice.
The IRS will also waive any applicable interest that is a result of any incorrect information of an IRS employee that you rely upon.
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Requesting A Penalty Abatement
To give your penalty abatement request a professional appearance, thereby increasing your success of receiving the abatement, the following steps are recommended:
Determine your reasonable cause explanation
Gather together your supporting documentation for that reasonable cause
Photocopy your IRS notice showing the penalty
Compose a penalty abatement request letter
Ø Mention the tax bill
Ø Explain your reasonable cause
Ø Be brief
Ø State you are requesting a penalty abatement
Ø Sign and date the letter
Make several copies of the request letter
Mail the request letter to the address noted. Also include:
Ø Supporting documentation for your reasonable cause
Ø Copy of the original IRS notice
Ø IRS Form 843 (Claim for Refund and Request for Abatement)
The mailing address for penalty abatements is the same IRS service center where you mail your 1040 series tax return.
Wait about 45 days after originally mailing your letter to the IRS. Then, send another copy of your request letter, if you have not heard anything. Simply change the date on the request letter.
The IRS should respond to your request within 60 days. When requesting your penalty abatement make certain to emphasize your positive IRS record, if it applies. Remind the IRS items such as not being late with taxes, not having pain any previous penalties, etc. The IRS may take this into consideration and help you out.
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Interest Abatement Request
You are allowed to request an interest abatement whenever you have had interest applied to your account as a result of:
IRS error of a managerial or ministerial task (loss of paperwork, i.e.)
IRS delay of a managerial or ministerial task (delay in processing, i.e.)
You could not have caused any significant impact upon the error or delay. Also, you need to have received a Notice of Deficiency containing the interest amount in order to request the interest abatement.
Form. To request the interest abatement, you will need to fill out IRS Form 843. Across the top of the form, you will write “Request for Abatement of Interest Under Section 6404(e)”.
On Line 5 you will put:
Circumstances of your case
Period to which the interest applies
Type of tax involved
Time you first notified by the IRS of the deficiency or interest due
Reason why not having the interest abated would be grossly unfair to you
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Penalty Abatement Defined
When a taxpayer is involved in repaying their delinquent tax bill with the IRS, an option available is known as an abatement.
An abatement, an IRS tax resolution method, allows taxpayers to repay their applicable tax bill, but the accompanying penalty or interest (if any) is removed from the tax bill. Therefore, taxpayers do not have to repay any penalties or interest on their tax bill. The penalty and interest are abated.
Do not consider an abatement if you cannot pay at least 75% of your total tax liability (less any penalties and interest).
In order to qualify for receiving a penalty abatement, however, you must show the IRS good reason (reasonable cause) for not being able to pay the entire amount due. As mentioned in other tips, reasonable causes consist of death, loss of income, illness, or imprisonment.
Request a penalty abatement using IRS Form 843 (Claim for Refund and Request for Abatement).
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When The IRS Gives Incorrect Information
Whenever you rely on IRS written advice which results in you receiving tax penalties, you are entitled to a penalty abatement.
The penalty will only be abated if you reasonably relied upon the IRS incorrect advice,
The written advice was in response to your request for advice, and the advice was not the result of your failing to supply information to the IRS.
You simply request this penalty abatement by filling out IRS Form 843. Across the top, simply write “ Request for Abatement of Penalty or Addition to Tax Under Section 6404(f) ”.
On Line 5 you will explain in detail your reasons for filing this claim and show your computation for the credit, refund, or abatement.
If you attach an additional sheet(s), include your name and SSN, ITIN, or EIN on it. Also, attach to Form 843 any appropriate supporting evidence such as:
Your written request for advice
Incorrect advice sent to you by the IRS
Any report containing tax adjustments, penalties, or items relating to advice
Submit the IRS Form 843 along with any supporting documentation to the IRS service center address where you filed your 1040 series tax return.
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Example Of A Penalty Abatement
Jane Widget had an unpaid tax bill totaling $30,000, including $7,500 in penalties. Jane entered into a tax resolution program known as an offer in compromise.
The IRS wanted to enter into an installment agreement whereby Jane would repay the entire $37,500. Jane, however, wanted to have the penalty abated due to her husband passing away three months ago.
Jane prepared a request for penalty abatement letter and submitted it to the IRS. The IRS agreed to it. Jane and the IRS entered into an Offer in Compromise agreement whereby Jane repayed a total tax bill of $30,000.
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