It is more important to file your tax return on time than to pay the tax on time. The IRS imposes a 5% penalty per month on unfiled tax returns and only a ½ % penalty per month for unpaid tax.
The IRS will abate your penalty for reasonable cause if you have any of the following facts and circumstances you can rely on:
– Death or serious illness of the taxpayer or immediate family.
– Unavoidable absence.
– Destruction of the business or records by fire or other casualty.
– Inability to determine the tax because of reasons beyond the taxpayer’s control.
– Civil disturbances.
– Lack of funds, but only when the taxpayer can demonstrate the exercise of ordinary business care and prudence.
– Other reasons establishing that the taxpayer exercised ordinary business care but could not comply within the prescribed time limits.
– Mistake was made
– Ignorance of the Law
– Statutory Exceptions or Waivers
– Undue Hardship
– Written Advice From IRS
– Oral Advice From IRS
– Advice from a Tax Advisor
– Official Disaster Area
– IRS Error
The Form 843 Claim for Refund and Request for Abatement is the form you will need to fill out to ask for abatement. If you are denied abatement of your penalty, you can write back and ask the IRS for an appeals conference. There no official form for this request. You have to write a letter titled “Penalty Appeal” and explain your precise reasonable cause. Attach the tax notice along with your supporting documentation in support of your case.
There is also a First Time Abatement Rule for taxpayers who have not been assessed in the past. You have to request this relief. The First Time Abate of penalties is an Administrative Waiver and must be requested in writing