Member Login

The Key to Solving an IRS Penalty Abatement

Tax Resolution Software

Sometimes failing to file or pay taxes on time is unavoidable, but that doesn’t stop the IRS from assessing both penalties and interest on your clients until their taxes are filed and their bills are paid in full. Knowing how and when to file for a penalty abatement can add yet another item to the tax resolutions services you offer and save your clients a substantial amount of money as they work to get back into good standing with the IRS.

Reasonable Cause

If your client was unable to file or pay due to personal circumstances beyond their control, you can file for a Reasonable Cause abatement. The IRS will consider any reason as long as you can prove that your client used every means necessary to meet their obligations and still were unable to do so. Some of the more commonly acceptable reasons include:

  •     Fire, flood, or natural disaster
  •     Inability to obtain records despite making every attempt to do so
  •     Death or serious illness that incapacitates your client or a member of their immediate family

Your client’s lack of funds does not in itself qualify as a reasonable cause, but if your client is unable to pay their tax bill because of one of the reasons listed above, that could qualify them for a refund of their penalties.

First-Time Abatement

Your client may also qualify for a penalty abatement if they have had no penalties assessed against them by the IRS within the prior three years or if they had never filed taxes before. The First-Time abatement only applies to your client if they filed on time or filed an extension and if they paid their taxes in full or made arrangements to pay.

Other Considerations

In both of these abatement instances, the failure-to-pay penalty continues to accrue until all taxes are paid, regardless of whether your client is granted an abatement. That means your client may be granted a penalty abatement only to accrue additional penalties on what they owe. Because of this, you should consider counseling your client to wait until all taxes are paid and then file the abatement request, which, if granted, will result in a refund of all penalties paid.

The abatement may also affect interest charges. Again, any unpaid balance will continue to accrue interest, but if a penalty is reduced or removed, the client’s interest charges on that money will be reduced or removed as well.

How IRS Solutions Can Help

IRS Solutions Software can guide you in filing for a penalty abatement on behalf of your client. The tax resolution software will analyze your client’s IRS transcripts and flag which filings qualify for first-time abatement. IRS Solutions also offers tips on how to find alternate documentation if your client’s documentation is lost and helps you construct the letter and forms you’ll need to make a reasonable cause claim.

IRS Solutions Software is available in affordable monthly and annual subscriptions so you can serve your clients year-round by providing tax resolution services with confidence. Don’t know how to charge for penalty abatement services? Worried about marketing tax resolution services to your clients? Use our FREE Tax Resolution Pricing & Marketing Survival Guide to build your menu of services. To get started, visit our website and enter your info to get a download link.

Sign up today with IRS Solutions Software and gain access to incredible features AND informative monthly Case Study Webinars conducted by a tax resolution specialist on the 4th Thursday of Every Month from 10am–11am PDT.

Not Sure How to Charge for Tax Resolution Services?

Grab a copy of our FREE Tax Resolution Pricing Guide today. Plus, get expert articles and updates that contain valuable info for tax pros sent straight to your inbox. Sign up below.

Tax Resolution

Become a Member Today!

You have Nothing to Lose with Our 60 Day Money Back Guarantee!

Get Started