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Home : Avoid IRS Penalty
IRS Penalty and Abatement
An IRS Penalty Abatement that sent as a simple letter to the IRS requesting that the IRS Penalties and Interest be abated will not be sufficient. The truth is that the IRS receives millions of these simple IRS Penalty Abatement request letters every year and the great majority will be summarily rejected. If you do not qualify for an IRS Penalty Abatement, we will tell you.
If an IRS Penalty Abatement request is worth making - AND AN IRS PENALTY ABATEMENT IS ALWAYS WORTH MAKING - an IRS Penalty Abatement is worth making correctly.
The IRS receives so many sub-par abatement requests for IRS Tax Relief, that a Penalty Abatement that is done with thought and thoroughness stands out in a positive way.
The purpose of IRS Penalties is to punish you, the taxpayer, for failing to comply and to send a message to other taxpayers that compliance will be strictly enforced. If neither of these purposes are furthered by the imposition of a IRS tax penalty, the IRS should not assess it. Furthermore, for most types of IRS tax penalties, if the taxpayer has Reasonable Cause for his failure to comply, the IRS tax penalty should not be assessed.
IRS Civil Penalties
Failure to pay a IRS Tax Liability can result in IRS Penalties and Interest that will compound over years. The interest and the penalties can be a smuch as 47% per annum. You can count on your IRS back tax debt to DOUBLE in approximately three (3) years. This will create an IRS tax liability that will be substantially larger than the initial amount owed. It won't take long for the IRS to bury you in Tax Debt Penalties if you DO NOTHING.
IRS TAX PENALTIES, as set out in the IRS Code, are imposed to "enhance" voluntary compliance. There are over one hundred-forty separate IRS tax penalty provisions.
Common IRS Civil Law Penalties
- The accuracy related penalties
- The IRS penalty for failure to timely file a return
- The IRS penalty for failure to timely pay a tax, and the frivolous tax return penalties
The fraudulent tax return penalty is set out in IRC Section 6663. This IRS penalty is "75%" of the portion of the underpayment [of tax] which is attributable to fraud. The fraudulent failure to file Tax return penalty is set out in IRC Section 6651(f). This tax penalty also has a maximum 75% rate. The accuracy-related tax penalty is set out in IRC Section 6662. This tax penalty is 20% of the amount of the portion of the understatement of tax attributable to the conduct being penalized. Accuracy tax penalties include the "negligence or disregard of rules or regulations" penalty, the "substantial understatement of income tax" penalty, the penalty for "substantial valuation misstatement," the penalty for "substantial overstatement of pension liabilities," and the penalty for "substantial valuation misstatement in connection with gift tax or estate tax".
Negligence or Disregard
The term "negligence" includes a failure to make a reasonable attempt to comply with the tax law or to exercise ordinary and reasonable care in preparing a return. Negligence also includes failure to keep adequate books and records. You will not have to pay a negligence penalty if you have a reasonable basis for a position you took.
The term "disregard" includes any careless, reckless, or intentional disregard. The penalty is based on the part of the underpayment due to negligence or disregard of rules or regulations, not on the entire underpayment on the return.
The IRS tax penalty for failure to timely file an IRS tax return is set out in IRC Section 6651(a). This IRS tax penalty is equal to 5% of the amount required to be shown on the tax return, per month up to a max of 25% of the amount required to be shown on the tax return.
Substantial Understatement of Income Tax
For an individual, there is a "substantial understatement" if the understatement of tax exceeds the greater of:
- 10% of the correct tax, or
THERE IS INTEREST ON TOP OF THE IRS TAX PENALTIES.
IRS Penalties and Interest will double your original IRS tax liability in approximately 3 years. Not to be redundant, but, this was worth mentioning twice.
Can you afford this? Of course you can't.
The IRS lists numerous situations in which IRS Penalties and Interest can be abated with reasonable cause based on your own unique situation.
The IRS considers Reasonable Cause for Penalty Abatement to be:
THERE ARE MORE TAX RELIEF "REASONABLE CAUSES".
- Ignorance of the Law (you must demonstrate you made a reasonable effort to learn the law though) Error or Mistake was Made, but you must still show "due diligence, ordinary business care and prudence" had been exercised.
- Forgetfulness, but you must still show "ordinary business care and prudence". Serious Illness, Death, or Unavoidable Absence.
- Unable to Obtain Records
- Incorrect Advice from a competent tax professional
- Incorrect Advice directly from the IRS, written or oral
- Fire, Casualty, Natural Disaster, Other Disturbance
With this information, the Tax Attorneys at Flat Fee Tax Service will Petition the IRS for your IRS Penalty Abatement.
The following information is excerpted directly from the Internal Revenue Manual, IRM 120.1.
- Reasonable Cause is based on all the facts and circumstances in each situation and allows the Internal Revenue Service to provide Tax Relief from an IRS Penalty that would otherwise be assessed. Reasonable Cause Tax Relief is generally granted when the taxpayer exercises ordinary business care and prudence in determining their tax obligations but is unable to comply with those tax obligations
- In the interest of equitable treatment of the taxpayer and effective tax administration, the non-assertion or abatement of civil penalties based on Reasonable Cause or other Tax Relief provisions provided in this IRM must be made in a consistent manner and should conform with the considerations specified in the Internal Revenue Code (IRC), Regulations (Treas. Regs.), Policy Statements, and Part 120.1.
The IRS Manual goes on to say that ANY REASON will be accepted as Reasonable Cause if it can be shown that the taxpayer exercised ordinary business care and prudence and, despite that, was still not able to comply with their tax obligations.Divorce?
An IRS Penalty Abatement Petition gives your Flat Fee Tax Service Attorney the opportunity to plead your case to the IRS. Unlike most other claims for Tax Relief, a IRS Penalty Abatement puts a very human face on your IRS case, which certainly can work for your best interest.
If you want IRS Tax Relief, we need to know your unique story. How did you find yourself in this situation?
Decisions are made by the IRS on an individual, case-by-case basis, which is very encouraging for you.
Loss of Income?
Death in the Family?
What Happened to You? Something happened.
In fact, IRS guidelines generously suggest that a Penalty Abatement should be generally granted when the taxpayer exercises ordinary business care and prudence in trying to pay their back taxes.
Reasonable Cause is a subjective matter and the only way to definitively determine whether or not a failure to comply was willful or a result of extenuating circumstances is for the IRS to conduct a thorough investigation of all the facts and circumstances giving rise to the failure.
This investigation is triggered by a correctly filed IRS Penalty Abatement Request.
Be aware, if you submit a Penalty Abatement petition and it is denied, you cannot make a request on the same grounds again. A IRS Penalty Abatement request should be done with a Tax Professional at your side.
No matter how well you state your case, the IRS Appeals Officer assigned to your IRS Penalty Abatement request will have some hard questions for you. The IRS Revenue Officer probably will look at your history of paying your IRS tax. The IRS will ask, "Is this just another attempt to get out of paying?" That is a question that needs to be overcome.
HAVE FLAT FEE TAX SERVICE REPPRESENT YOU BEFORE THE IRS AND SAVE YOURSELF MONEY.
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