Understanding IRS Penalty Abatement

For one reason or other, many taxpayers have failed to timely file a federal tax return or failed to timely pay their balance.  Penalties can be significant, and often significantly add to the taxpayer's problems--making it much more difficult to come into compliance.  These clients should be advised that the IRS fortunately allows certain penalty abatements.  Taxpayers who have filed their returns and have had no penalties in the three prior tax years will generally qualify for a first-time abatement.  The taxpayer must have paid, or arranged to pay, any amounts owed to the IRS.  Taxpayers can request FTAs by calling the IRS directly.  Taxpayers can also request FTAs by submitting IRS Form 843, "Claim for Refund and Request for Abatement by mail.  Taxpayers can also grant reasonable cause penalty abatements for things like illness, death, natural disaster, undue hardship, inability to obtain records, mistakes or misunderstandings.  These taxpayers must be able to demonstrate that they exercised ordinary business care and prudence, and may be required to submit supporting documentation.  For more information on penalties for failure to timely pay income taxes, visit Tax Facts Online. Read More: Link to Q648.