IRS Penalty Abatement Attorney

Our Lawyers Help Eligible U.S. Taxpayers Secure Penalty Relief from the IRS

The Internal Revenue Service (IRS) imposes penalties for several types of violations, and these penalties can substantially increase taxpayers’ total liability. Since the IRS also charges interest on penalties (in addition to charging interest on back taxes), any delays in paying these penalties can lead to additional costs as well.

If you are facing substantial liability for penalties and interest, an IRS penalty abatement lawyer at Oberheiden P.C. can help. We have extensive experience working with the IRS on behalf of our clients. Our attorneys can assess whether you have any penalties eligible for abatement; and, if so, we can assist you with securing the maximum penalty relief that is available. If you are not eligible for penalty abatement, or if you have grounds to challenge the penalties that the IRS has imposed, we can assist you with taking appropriate action in these scenarios as well.

3 Types of Penalty Relief Available from the IRS

The IRS currently has three penalty relief programs. Each of these programs is available to taxpayers in different circumstances; and, if you need to seek penalty relief, identifying the program that applies to your specific circumstances will be the first step toward reducing the amount you owe. The IRS’s penalty relief programs are: (i) first-time penalty abatement; (ii) reasonable cause; and, (iii) statutory exceptions.

1. First-Time Penalty Abatement

The IRS provides an administrative waiver to eligible taxpayers under its first-time penalty abatement program. First-time abatement is available for:

• Failure-to-file penalties for individual tax returns, partnership returns, and S corporation returns
• Failure-to-pay penalties for taxes not paid by the applicable due date
• Failure-to-deposit penalties for payroll taxes and other applicable taxes

As the IRS explains, qualifying for first-time penalty abatement requires “a history of good tax compliance.” The IRS considers a taxpayer to have a history of good tax compliance if:

• The taxpayer filed the same type of return that triggered the penalty in each of the three prior tax years (if filing was required); and,
• The taxpayer has not received any penalties in the previous three years, or has had any penalties removed other than through first-time abatement.

Alternatively, the IRS will consider first-time abatement for a taxpayer facing a failure-to-deposit penalty who has fewer than four failure-to-deposit penalty waivers in the previous three years, and who is not currently facing a failure-to-deposit penalty based on Electronic Federal Tax Payment System (EFTPS) avoidance. In all cases, if the IRS grants first-time penalty abatement, it will also reduce or eliminate the interest owed passed on the outstanding penalty (or penalties).

2. Reasonable Cause

The IRS also grants relief from certain penalties for “reasonable cause.” As the IRS explains, reasonable cause “is determined on a case by case basis considering all the facts and circumstances,” and, “[r]easons that qualify for relief due to reasonable cause depend on the type of penalty you owe.” Here are some examples:

Failure-to-Pay Penalties

As the IRS states, “[y]ou may qualify for penalty relief if you demonstrate that you exercised ordinary care and prudence and were nevertheless unable to file your return or pay your taxes on time.” Examples of reasonable cause for failure to pay include things like natural disasters, death or serious illness in the family, inability to obtain necessary records from third parties, and issues with the IRS’s electronic filing and payment systems. However, the following do not constitute reasonable cause for payment failures according to the IRS: reliance on a tax professional, lack of knowledge of applicable requirements, mistakes and oversights, and insufficient funds to pay the amount due.

Accuracy-Related Penalties

The IRS abates first-time accuracy-related penalties based on reasonable cause when the circumstances warrant relief. In determining whether relief is warranted, the IRS considers factors including:

• The complexity of the tax issue (or issues) involved
• The taxpayer’s education, experience, and knowledge of the law
• The taxpayer’s efforts to accurately report the amount owed
• The steps the taxpayer took to understand its situation and seek help from a tax advisor

Reliance on a tax professional can constitute grounds for seeking first-time penalty abatement for accuracy-related penalties. However, the IRS will examine whether you provided your tax professional with all necessary information, and it will also consider whether your chosen tax professional was competent to provide advice regarding the tax issue (or issues) in question.

Information Return Penalties

The IRS abates information return penalties (i.e., penalties for failure to file an FBAR) when taxpayers can show that: (i) they acted in a “responsible manner both before and after the failure;” and, (ii) there were “significant mitigating factors with respect to the failure.” Among other things, this means that taxpayers seeking abatement of information return penalties must be able to show that they:

• Requested extensions when possible
• Tried to prevent a foreseeable failure to file
• Addressed the issue (or issues) that caused the failure
• Corrected the failure as quickly as possible

“Significant mitigating factors” can include anything beyond a taxpayer’s control. These include actions by the IRS, actions by taxpayers’ advisors, inability to access necessary records, and economic hardships, among others.

3. Statutory Exceptions

U.S. taxpayers can also qualify for penalty relief based on statutory exceptions. As each of these exceptions has numerous specific requirements, we strongly advise consulting with an experienced IRS tax abatement attorney to determine if you qualify. The statutory exceptions that provide access to penalty relief are: (i) reliance on incorrect written advice from the IRS; (ii) mailing a return on time; (iii) living in a federal disaster area; and, (iv) being involved in military operations in a combat zone.

Put our highly experienced team on your side

Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester

Former U.S. Attorney

Hon. Kevin McCarthy

55th Speaker, U.S. House of Representatives (ret.)

Government Consultant

Mike Pompeo

Of Counsel

Former U.S. Secretary of State

John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara

Federal Appeals Attorney

Nicholas B. Johnson

Former Prosecutor

Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

Disputing IRS Penalties

While seeking IRS penalty abatement is an option for U.S. taxpayers in a variety of circumstances, you should not have to seek abatement if the penalties imposed against you (or your company) are unwarranted. If you disagree with the IRS’s assessment of your (or your company’s) liability—including penalty liability—our lawyers can determine what options you have available. If the IRS made an incorrect determination of liability, your best course of action may be to file an appeal. A successful appeal can result in complete removal of penalties and interest, as well as elimination of any unwarranted federal tax liability.

FAQs: Seeking Relief from IRS Penalties

Schedule a Confidential Consultation with an IRS Penalty Abatement Lawyer at Oberheiden P.C.

If you would like to discuss your options with an IRS penalty abatement attorney at Oberheiden P.C., we invite you to get in touch. Call 888-680-1745 or request an appointment online to schedule a confidential consultation as soon as possible.