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IRS Abatement of Penalties
Generally, interest charged by the IRS is not available for abatement.  However, penalties are available for abatement provided the taxpayer qualifies.  Let us help you complete your penalty abatement request!

  Please find below an Actual IRS abatement Letter

IRS ABATEMENT OF PENALTIES

The IRS may abate the unpaid portion of the assessment of any tax or any liability concerning the tax which:

(1) is in excess of the correct tax liability;

(2) is assessed after the expiration of the applicable period of
limitation; or

(3) has been erroneously or illegally assessed. Code Section
6404(a).

In addition, any penalty or addition to tax that is attributable to erroneous advice furnished to the taxpayer by an officer or employee of the IRS. Code Section 6404(f). A written response issued to a taxpayer by an officer or employee of the IRS is advice only if the response applies the tax laws to the specific written facts submitted by the taxpayer and
provides a conclusion as to the tax treatment of the taxpayer based upon application of the tax laws to those facts. Reg. Section 301.6404-3.

Abatement is permitted only if:

(1) the advice was furnished in response to a specific written
request from the taxpayer;

(2) the taxpayer reasonably relied upon the written advice from the IRS; and

(3) the taxpayer furnished adequate and accurate information in making the request. Code Section 6404(f)(2).

A written request from a representative of the taxpayer is considered a written request by the taxpayer if the representative is an attorney, a certified public accountant, an enrolled agent, an enrolled actuary, or any other person permitted to represent the taxpayer before the IRS and
who is not disbarred or suspended from practice before the IRS; and the written request for advice either is accompanied by a power of attorney that is signed by the taxpayer and that authorizes the representative to represent the taxpayer for purposes of the request, or such a power of
attorney is currently on file with the IRS. Reg. Section 301.6404-3(b)(3).

If taxpayer receives the advice after filing the tax return, the taxpayer cannot have relied on the advice. See Reg. Section 301.6404-3(b)(2)(ii). In contrast, if the taxpayer receives advice and thereafter files an amended return that conforms to the written advice, the taxpayer is deemed to have reasonably relied on the advice. See Reg. Section 301.6404-3(b)(2)(iii). For written advice that does not relate to an item included on a federal tax return (for example, advice relating to the
payment of estimated taxes), if such written advice is received by the taxpayer subsequent to the act or omission that is the basis of the penalty or addition to tax, then the taxpayer is not considered to have reasonably relied on the written advice. See Reg. Section 301.6404-3(b)(2)(ii).

A request for abatement must be filed within the period allowed for collection of the penalty, or, if the penalty has been paid, the period allowed for claiming a credit or refund of the penalty. Reg. Section 301.6404-3(e).

The advice issued by the IRS is valid until the taxpayer is put on notice that the advice no longer may be relied upon. The taxpayer is considered to be put on notice by: Reg. Section 301.6404-3(b)(2)(v)

(1) Correspondence from the IRS stating the advice no longer represents IRS position.

(2) Enactment of legislation or ratification of a tax treaty.

(3) A decision of the United States Supreme Court.

(4) The issuance of temporary or final regulations.

(5) The issuance of a revenue ruling, a revenue procedure, or other statement published in the Internal Revenue Bulletin.

The regulations prescribe that a request for abatement is to be filed on a Form 843 that is to be filed:

(1) If the request relates to an item reported on a tax return, to the IRS Service Center to which the return was filed.

(2) If the request does not relate to an item that was reported on a tax return, to the IRS Service Center to which the taxpayer's return was filed for the taxable year during which the taxpayer relied upon the erroneous advice. Reg. Section 301.6404-3(d).

The Form 843 must be accompanied by copies of:

(1) the taxpayer's written request for advice;

(2) the erroneous written advice furnished by the IRS; and

(3) the report (if any) of tax adjustments that identifies the
penalty or addition to tax and the item relating to the erroneous written advice. Reg. Section 301.6404-3(d).

ASSESSMENT AND COLLECTION PROCEDURES FOR PENALTIES

Chapter 68 of the Code recognizes a distinction between Subchapter A additions to tax and Subchapter B assessable penalties. Assessable penalties typically are stated as fixed dollar amounts, in contrast to many of the additions to tax, which are quantified by reference to tax shown or required to be shown on the return.

Penalties, including both additions to tax and assessable penalties, generally are to be paid upon notice and demand, and they generally are to be assessed, collected, and paid in the same manner as taxes. See Code Sections 6665(a), 6671(a). In some instances, however, quantification of
the penalty is not possible until an underlying tax liability has been determined. If the underlying tax may be resolved by resort to the deficiency procedures (including litigation in the Tax Court before payment of the penalty), the penalty may be determined under the deficiency procedures as well. If the taxpayer has admitted (by filing a return) that additional tax is due but the additional tax has not been paid, the deficiency procedures are inapplicable as to the assessment of  the additional tax due.  Similarly, the deficiency procedures are not applicable to the penalty for failure to pay the additional tax due.

The additions to tax that are subject to the deficiency procedures if the underlying tax is subject to the deficiency procedures include: Code Section 6665.

(1) the delinquency penalties, but only to the extent attributable to a deficiency. See Section 606.3

(2) the penalty for failure to make estimated tax payments, when no return is filed. See Section 606.7

(3) the accuracy-related penalties. See Section 606.4

(4) the fraud penalty. See Section 606.5

EXAMPLE 1: Anna files an income tax return for year 1 on May 15, year 2. The delinquency in filing is not due to reasonable cause and Anna has not been granted an extension. The return correctly shows $1,000 as the tax due for the year. The amount of the failure to timely file
penalty is $50 ($1,000 x 1 x .05). The $50 penalty is not subject to the deficiency procedures because the deficiency procedures do not apply to the $1,000 tax for which the penalty is being asserted.

EXAMPLE 2: Greg files an income tax return for year 1 on May 15, year 2. The delinquency in filing is not due to reasonable cause and Greg has not been granted an extension. The return that is filed shows $1,000 as the tax due for the year. However, the tax required to be shown is $1,500, creating a deficiency of $500. The amount of the
failure to timely file penalty is $75 ($1,500 x 1 x .05). Of the $75 penalty, $50 is not subject to the deficiency procedures because the deficiency procedures do not apply to the $1,000 tax for which the penalty is being asserted. The remaining $25 of the penalty is subject to the deficiency procedures.

The assessable penalties of Subchapter B of Chapter 68, in which the amount of the penalty is quantified by the applicable statute rather than being determined on the amount of tax liability, generally are not subject to the deficiency procedures and are assessed and collected in the same manner as a tax. Code Section 6671 Notice and demand is made for payment
and if payment is not made within ten days after such notice and demand, the IRS may collect the amount due.

In addition to the penalty abatement procedures generally available to taxpayers, discussed in Section 606.12(c), a post- assessment appeal procedure is available to any person against whom an assessable penalty is imposed. Reg. Section 601.106(a)(1)(iii).

The penalties for aiding and abetting an understatement of tax liability and filing a frivolous tax return (along with the penalty for promoting abusive tax shelters) are expressly excluded from the deficiency procedures. Code Section 6703(b). Accordingly, the Tax Court does not have jurisdiction over these penalties. The taxpayer may contest the penalty only by (1) paying the penalty amount, filing a timely refund claim, and suing upon its rejection or (2) using the special procedure
that permits judicial review of the asserted penalty (but not the frivolous return penalty) before full payment if (1) the taxpayer, within 30 days of receipt of notice and demand for payment of the penalty, pays at least 15 percent of the penalty and files a refund claim for the amount so paid, and (2) the taxpayer brings a refund suit in the United
States District Court within 30 days of the earlier of (a) the denial of the refund claim or (b) the expiration of six months after the day on which the refund claim was filed. Code Section 6703(c). If the taxpayer uses this procedure, the IRS may not proceed to collect the penalty until final resolution of the refund suit. Code Section 6703(c)(1). The running
of the limitations period for collecting the penalty is suspended for the period that the IRS may not collect the penalty under this procedure.  Code Section 6703(c)(3)
 

IRS PENALTY NOTICE

For notices issued and penalties assessed after June 30, 2001, the IRS is required to include, with each notice that imposes a penalty (including an addition to tax or additional amount), information concerning the name of the penalty, the Code Section under which the penalty is imposed, and a
correct computation of the penalty. Code Section 6751(a). To prevent unsupervised proposed penalty assessments, a penalty (including any addition to tax or any additional amount) can not be assessed unless the initial determination of the assessment is personally approved (in writing) by the immediate supervisor of the individual making the
determination or such higher level official as the IRS may designate. However, this requirement does not apply to any addition to tax for failing to file or pay, failing to pay estimated taxes, or any other penalty automatically calculated through electronic means. Code Section 6751(b). To give the IRS time to adopt procedures to implement the new requirements, Code Section 6751 applies to notices issued and penalties
assessed after June 30, 2001.

PRACTICE TIP: For any notice of penalty issued after June 30, 2001, and before July 1, 2003, the requirements of Code Section 6751(a) are treated as met if a penalty notice contains a telephone number at which the taxpayer can request a copy of his assessment and payment history with respect to the penalty. The Community Renewal Tax Relief Act of 2000, Pub. L. 106-554, Section 302(b).

The accrual of certain penalties, additions to tax, or additional amounts that are computed according to the period the failure continues to exist are suspended if the IRS has not sent the taxpayer a notice, specifically stating the taxpayer's liability and the basis for the liability, within 18 months (one year for taxable years beginning after December 31, 2003) following the date that is the later of (1) the original due date of the
return or (2) the date on which the individual taxpayer timely filed the return. Code Section 6404(g). If the suspension provision applies, further accrual of the penalty, addition to tax, or additional amount is suspended during the suspension period under Code Section 6404(g)(3).  The suspension period starts on the day after the close of the foregoing
18-month period (or one-year period for taxable years beginning after December 31, 2003) and ends 21 days after the IRS sends the required notice to the taxpayer. The provision is applied separately for each item or adjustment. The suspension applies only to individual taxpayers who
file a timely tax return. Code Section 6404(g). It does not apply to the delinquency penalties discussed in Section 606.3, penalty, in the case of fraud, or to criminal penalties. Code Section 6404(g)(2).
 

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