The IRS can abate penalties for “reasonable cause.” That does not mean the IRS will abate penalties because a taxpayer did not have the money to pay the tax. The IRS takes the position that it should be paid first after the necessities (as the IRS views them) of life. However, events or conditions like illness, casualty, divorce or impairment that prevent compliance will support abatement.
There are categories of reasonable cause that give the representative significant room to maneuver and argue that a penalty should be abated. For example, the IRS will actually consider the taxpayer’s ignorance of the tax or requirement in abating a penalty. This argument is especially persuasive if it is the taxpayer’s first experience with a particular type of tax, such as withholding of tax or the self-employment tax. If the taxpayer believed that there was insufficient income to require filing, or thought that particular income was not taxable, the IRS will consider abatement depending on the circumstances.
The IRS also considers mitigating circumstances, which can be very important in making the case for penalty abatement. What kind of circumstances does the taxpayer describe? Was there lack of willful intent? Did the taxpayer call the IRS for advice, but phones were busy? Is there some unique situation? Did the taxpayer change jobs, move or have marital difficulties? Did the taxpayer detect the error in the first place? Did the taxpayer correct the error?
Making the argument based on a personal situation is the key tax abatement. Do not be reluctant to ask your client about what was going on in his or her life when the tax problem arose. Get the details. Tell the story. That is how you succeed at penalty abatement.
See what our Kansas City tax attorney can do on your behalf. From tax law to tax resolution, clients feel confident when they turn to Jeffrey R. Siegel, Esq. Call now.
