6 Ways to an IRS Penalty Abatement

June 7, 2017

Recently I’ve been asked on multiple occasions about IRS penalty abatement, so I decided to make it the subject of today’s blog post.  As with most topics Internal Revenue Service-related, there’s a specific form you’ll first need to fill out to obtain an IRS penalty abatement.  That’s IRS Form 843, Claim for Refund and Request for Abatement. And as the IRS makes abundantly clear in the Internal Revenue Manual, there are six primary criteria for obtaining IRS penalty abatement.

The 6 Ways to Get an IRS Penalty Abatement

1. Penalty Relief For First Time Offenders

The IRS has the ability to abate penalties for first time offenders under its First Time Penalty Abatement (FTPA) policy. Taxpayers may qualify under the FTPA for relief from penalties for failing to file a tax return, pay on time, and/or deposit taxes when due under the Service’s First Time Penalty Abatement policy provided the taxpayer didn’t previously have to file a return or have had no penalties in the 3 prior tax years; all currently required returns have been filed or are on a valid extension of time to file; and the taxpayer has paid, or arranged to pay, any tax due.

2.  Reliance on Written Advice From the IRS

Under Internal Revenue Code Sec. 6404(f) and Treas. Reg. 301.6404–3 the IRS is required to abate any portion of a penalty attributable to inaccurate written advice from the IRS   In order to  qualify for IRS penalty abatement based on inaccurate written advice from the IRS taxpayers must make the request for abatement within the period allowed for collection of the penalty or addition to tax, or, if the penalty or addition to tax has already been paid, then within the corresponding period allowed for claiming a credit or refund.

3.  Reliance on Oral Advice From the IRS

A second way to qualify for IRS penalty abatement is to show detrimental reliance on oral advice from the IRS.  While reliance on inaccurate written ITS advice is mandated by the IRC and Treasury regulations, the IRS has administratively extended the rule to include erroneous oral advice when appropriate.  In determining whether to grant IRS penalty abatement to a taxpayer, the Service will consider the following:

  • Whether the taxpayer exercised ordinary business care and prudence in relying on that advice.
  • Whether there is a clear relationship between the taxpayer’s situation, the advice provided, and the penalty assessed.
  • The taxpayer’s prior tax history and prior experience with tax requirements.
  • Whether the IRS provided correct information by other means (such as through tax forms and publications)
  • The type of supporting documentation available, such as a notation of the taxpayer’s question to the IRS, any documentation regarding the advice provided by the IRS, information regarding the specific IRS office involved and the method by which the advice was obtained, the date the advice was provided, and the name of the IRS employee who provided the information.

4.  Advice on Advice From a Tax Adviser

Internal Revenue Code Sec. 6664(c) provides for a reasonable cause exception from the accuracy-related penalty under IRC 6662.  Detrimental reliance on the advice of a tax adviser is generally related to this reasonable cause exception and may provide grounds for an IRS penalty abatement.

5.  Official Disaster Area

In the event of a major disaster or emergency,  such as an earthquake, hurricane, or tornado which affects numerous taxpayers within a specific geographical area, the IRS often provides tax relief  in the form of extensions of time to file or pay.  The determination of the type and extent of such relief is made by the IRS on a case-by-case basis.

6.  Correction of Service Error

If the IRS makes an error regarding a taxpayer’s taxes, it has the ability to abate penalties.  Examples of IRS error examples include math errors made when manually computing a penalty;  valid extensions of time to file that failed to properly post to a taxpayer’s file; and any other error, provided it can be shown that the taxpayer was in compliance with applicable law; and the IRS did not initially recognize the taxpayer’s compliance.

Get Help From a New York Tax Attorney Today!

Obtaining an IRS penalty abatement can be difficult.  If you think you qualify for one, contact a New York tax attorney at Mackay, Caswell & Callahan, P.C.  With offices in both Upstate and New York City , Mackay, Caswell & Callahan, P.C. has helped many clients resolve tax issues, including those related to IRS penalty abatement. With more than 30 years of experience in assisting taxpayers with all sorts of tax-related issues, we can help you review your own case and understand your options. We can help you determine whether you qualify for an IRS penalty abatement. We have offices in Albany, New York City, Rochester, Syracuse, Utica and Watertown. Don’t delay; we have a New York tax attorney ready to help you with your tax issues.


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