A Penalty Abatement is an IRS program where the IRS removes some or all of the accumulated penalties from the tax debt, substantially reducing the total of the overall amount.
The IRS enforces penalties to encourage voluntary compliance of the tax code. Compliance consists of preparing an accurate return, filing it in a timely manner, and paying any tax due. Efforts made to fulfill these obligations constitute compliant behavior according to the IRS. Most penalties apply to behavior that fails to meet any or all of these obligations.
To qualify for Penalty Abatement, you must show reasonable cause for your failure to fulfill your obligations. Reasonable cause is based on all the facts and circumstances in each situation and can include:
- Death of a family member
- Serious health problem
- Bad or erroneous financial advice
- Flood, hurricane, fire or other natural disaster
- Theft of funds, including embezzlement
- Lost or destroyed records
- Divorce that caused extreme stress and deteriorated your financial condition
- Unemployment for an extended period of time
- Fixed income or retiree
- Financial strain caused by caring for another person
- The application for a Penalty Abatement is reviewed by a IRS, and is entirely up to them to make the final decision.