What Is A Penalty Abatement (PENAB)?
Penalty abatement is a relief program under the IRS Fresh Start Initiative that forgives penalties on an outstanding balance. While it doesn’t eliminate the tax liability itself, it can reduce the total amount owed by thousands of dollars.
The IRS grants penalty abatement only for reasonable cause, and your chances of approval increase significantly with the help of a tax professional. Penalty abatement is considered a form of Fresh Start tax relief.
When Should You Consider Penalty Abatement?
Tax liabilities are challenging to manage due to the interest and penalties that accrue monthly on unpaid balances.
Penalties and interest can quickly grow, becoming a significant part of a taxpayer’s bill, as the IRS compounds them daily. This accumulation can make it nearly impossible to fully pay off a tax debt, particularly through an Installment Agreement.
TaxRise can assist you in obtaining penalty abatement as part of a broader strategy to achieve financial freedom.
What Are the Requirements for Penalty Abatement?
To qualify for penalty abatement, you must first be compliant with the IRS.
Compliance is determined by your current tax filing status. If you have unfiled tax returns, you are not compliant with the IRS and therefore ineligible for penalty abatement or any other IRS Fresh Start Initiative relief program.
Once you are up to date with your tax filings, you can submit a request to the IRS for penalty abatement.
If you are not applying for first-time penalty abatement, you will need to prove a reasonable cause as to why you paid or filed late.
Can I Qualify On My Own?
Yes, you can apply for penalty abatement on your own. First-time penalty abatement is generally easier for taxpayers to obtain.
However, if you’ve previously received penalty abatement and then incurred additional liabilities, interest, and penalties, proving your case to the IRS again will be more challenging.
Penalty abatement is often just one component of a tax relief company’s strategy to help eliminate your tax liability. Consulting with a professional before pursuing this option is advisable, as it can impact your future financial freedom.
What Is The Process of Qualifying?
You can request penalty abatement at any level of the IRS, including an IRS campus, automated collection system, or local IRS offices. Note that a local IRS office can only grant penalty abatements up to $100. Requesting penalty abatement is free.
The IRS requires sufficient evidence to accept a request under the Fresh Start Initiative. When submitting a request by mail, include as much supporting evidence as possible. Documentation is crucial for meeting the strict qualifications of the IRS Fresh Start Program.
Necessary documentation may include doctor’s statements, fire department reports, insurance claims, or family members’ death certificates. Additionally, we recommend including a letter with your Form 843 explaining your situation.
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