Saturday, April 16, 2011

Stop the IRS -- What is Reasonable Cause -- Penalty Abatement Tax Relief

IRS PENALTY ABATEMENT 

Reasonable Cause


Flat Fee Tax Service is known for stopping an IRS Wage Levy in it tracks but we are also known for our IRS Penalty Abatement work.

If an IRS Penalty Abatement is worth making - and an IRS Penalty Abatement is always worth making - an IRS Penalty Abatement is worth doing it right.

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It is no fun when the IRS adds penalties and interest to your back tax debt at approximately 47%. Your back tax debt will double in approximately 3 years. If you are having a difficult time paying your back tax liability, you may feel like the IRS is just trying to add insult to your injury. 






What the IRS is actually trying to do, in their convoluted way,  is encourage voluntary compliance with their tax laws even though they are burying you in tax debt. The IRS knows that certain events are out of your control and may cause you to file a tax return late or make a tax payment late. If this is the case and you are not eligible for an Offer in Compromise, you may qualify for an IRS penalty abatement due to reasonable cause.

REASONABLE CAUSE 

What is Reasonable Cause

By claiming reasonable cause for non-compliant behavior (unfiled tax returns, not paying, etc), you are saying that there was no willful neglect on your part. In other words, you didn't do it on purpose. 


Reasonable cause is the set of events or circumstances, specific to each individual situation, which acts to explain the non compliant behavior of an individual. Circumstances were outside of your control, or that made it virtually impossible to, do what you were supposed to do (file tax returns, pay, etc.).

The IRS recognizes the following arguments (possible reasons) for reasonable cause:

1. Death 



If there was a death in your immediate family (such as spouse, sibling, parent, grandparent, or child) that prevented you from complying with the IRS, you may qualify for an IRS penalty abatement. You need to be prepared to explain to the IRS who died, the date the death occurred, and exactly how the death prevented you from meeting your obligations to the IRS. You will need the following to support your claim: Copy of the death certificate.

2. Serious Illness 



If either you or an individual in your immediate family had a serious illness which prevented you from complying with the IRS, you may qualify for an IRS penalty abatement. A serious illness is usually one which requires some type of continual care, either at a hospital, clinic or personal care at your home. An illness could be substance abuse, etc. You should have the following documentation to support your penalty abatement claim: Doctor's statement detailing and documenting your illness (Medical bills, etc.).

3. Unavoidable Absence



An unavoidable absence means that you were not at your residence and could not comply with the IRS, at no fault of your own. Valid examples of this are incarceration, detainment in a foreign country, or deployment to a Combat Zone. You should have the following documentation to support your IRS penalty abatement petition: Proof of incarceration, Copy of passport showing dates you left and entered the country, Documentary proof that you were detained, Proof that you were in a Combat Zone. 

4. Bankruptcy 



If you were in bankruptcy when a failure to pay penalty was assessed, you can request penalty abatement for reasonable cause. Bankruptcy will not be considered as reasonable cause for a failure to file penalty.


You should have the following documentation to support your penalty abatement claim: Bankruptcy filing documents.

5. Extreme Financial Hardship 



In order to qualify for reasonable cause due to an inability to pay because of extreme financial hardship, you must show the IRS that you would have suffered a substantial financial loss if you had paid the tax by the due date. In most cases, this financial hardship is due to an unexpected event. 


You should have the following documentation to support your penalty abatement claim: Bank statements showing the amount in your accounts when payment was due, Statements and/or bills showing the unexpected cost that was incurred.

6. IRS Error 



Yes, the IRS makes errors. If the IRS made an error in computing or assessing tax on your account or crediting your account with a payment, you can request penalty abatement due to reasonable cause. You will have to show the IRS that you did comply with the law from the beginning and the IRS did not recognize that fact. You should have the following documentation to support your penalty abatement petition: IRS Notice or Letter showing the error, IRS Publication showing the error, Specific citation of rule or correct application from a law source.

7. Incorrect Written Advice from the IRS: 



Yes, the IRS will give incorrect advice. If an IRS employee issued your erroneous advice in writing, the IRS will abate the penalty that resulted from you following the advice. You should have the following documentation to support your IRS penalty abatement petition: Copy of your request for advice, Copy of IRS response to your request.

8. Incorrect Verbal Advice from the IRS 



Once again, the IRS can give you 5 different answers to the same question. It happens more frequently than we would like, but it happens. If an IRS employee gives you erroneous advice either over the phone or in person, the IRS may abate the penalty that resulted from you following the advice. This type of reasonable cause is not as effective as having incorrect written advice because it is essentially your word against the IRS. You should have the following documentation to support your penalty abatement petition: Notation of your question to the IRS, Documentation regarding the advice provided by the IRS.

9. Postal Service Error 



If the USPS lost your mail or made an error regarding the delivery of your tax return or your tax payment (delivering your mail to another taxing agency for example), you can request that the associated IRS penalty be removed due to reasonable cause. You should have the following documentation to support your penalty abatement petition: Statement from USPS concerning the error.

10. Tax Professional Error 



Reliance on a tax professional provides reasonable cause only when it is associated with a technical or complicated tax issue, such as an accuracy related penalty. Failing to file or pay your taxes on time cannot be excused because of advice from a tax professional. You should have the following documentation to support your claim: Copy of incorrect advice, Copy of document showing the error made.

11. Lack of Forms 



If you did not have the tax correct forms or tax schedules needed to complete your tax return, the IRS may abate your penalties due to reasonable cause. However, with the accessibility to forms through the Internet and through most public libraries, this is not one of the stronger arguments for reasonable cause. The IRS will also take into account whether or not you filed an extension to receive extra time to get the forms. You should have the following documentation to support your penalty abatement claim: Copy of extension filed.

12. Inability to Obtain Forms 



An inability to obtain forms indicates that you tried to get the forms needed to complete your tax return, but could not, for reasons outside of your control. Most often, this includes not receiving earning statements from an employer. You should have the following documentation to support your penalty abatement claim: Copy of extension filed, Copies of letters written and/or received in effort to obtain documentation.

13. Fire 



A fire that destroyed your tax records may be reasonable cause for failing to comply with the IRS. The IRS will consider the timing of the fire in relation to when your return or payment was due and whether or not you had any other copies of your records to fulfill your tax obligation. You should have the following documentation to support your IRS penalty abatement claim: Copy of insurance claim, Report from fire department.

14. Theft 



If your records were stolen and you consequently could not comply with the IRS, you have reasonable cause for failing to comply with the IRS. If you misplaced or lost your documents, however, this is not the same as having your records stolen - misplacement is under your control; having your records stolen is not. You should have the following documentation to support your IRS penalty abatement petition: Copy of insurance claim, Copy of police report.

15. Disaster Area



If you are located in an Official Disaster Area, the IRS usually issues special instructions for requesting penalty abatement. You should have the following documentation to support your penalty abatement claim: Copy of insurance claim.

16. Unknown Filing Requirement 



If you did not know that there was a tax filing or tax payment requirement, and could not reasonably be expected to know, you may have reasonable cause for failing to comply with the IRS. You should be able to show the IRS that you did make a reasonable effort to comply with any requirements you were aware of. You should have the following documentation to support your claim: Documentation showing when the new requirement went into effect.

17. Tax Law Change 



A recent tax law change of which you were unaware (and could not reasonably be expected to know) can provide basis for reasonable cause. You should have the following documentation to support your claim: Citation of tax law.



18. Something Happened to You

Tell us what happened to you. Something happened to cause to you not file or pay the IRS on time. What was it? Did you get divorced? Lose your job? What was it? Let us know what caused you to not meet your obligation. 

DO IT RIGHT

YOU GET ONE BITE AT THE APPLE

You only get one (1) opportunity at an IRS Penalty Abatement. An IRS penalty abatement needs to petitioned correctly. A simple letter will not suffice as the IRS receives thousands upon thousands of simple abatement letters every year. 




The IRS is in the business of collecting money, not giving it away.


An IRS Penalty Abatement petition must be crafted thoughtfully and professionally.


If an IRS Penalty Abatement is worth doing

 - and it always is -

 an IRS Penalty Abatement claim is worth doing right.

HALF OF YOUR TAX DEBT

MAY BE PENALTIES & INTEREST

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2 comments:

  1. With an unpaid IRS tax debt comes penalties and interest. If you failed to file your tax returns or pay your tax debt on time, you may have a reasonable cause that will reduce or eliminate the penalties and interest. Find out what a reasonable cause is.

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  2. With an unpaid IRS tax debt comes penalties and interest. If you failed to file your tax returns or pay your tax debt on time, you may have a reasonable cause that will reduce or eliminate the penalties and interest. Find out what a reasonable cause is.

    Call Flat Fee Tax Service, Inc.: 1-888-875-4506

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