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Abatement of Penalties & Interest

Most of our clients show up at our office with a tax bill with penalties and interest. Penalties were originally meant to encourage timely filing and payment of taxes due from taxpayers. However, penalties have become an official source of IRS revenue. Penalties are often added automatically by IRS computers, but may also be added at the discretion of IRS personnel. Interest is added to a tax bill because the IRS view is that the taxpayer is borrowing the money owed from the government. Penalties can be assessed for a variety of reasons, including failure to file, failure to pay, fraudulent failure to file, accuracy and fraud. In fact, the IRS has the authority to assess over 140 different types of penalties. The term the IRS uses for the elimination of a penalty or interest is abatement. For many of the reasons the IRS may assess penalties, arguments may be made to have those penalties abated. The most common method of abatement is “reasonable cause.” Here, the IRS looks at all of the facts and circumstances surrounding the situation leading to assessment of the penalties. Relief is granted if the taxpayer exercised ordinary business care and prudence in determining their tax obligations but was unable to comply with those obligations. The existence of any of the following factors, among others, may establish reasonable cause:  Death, serious illness, or unavoidable absence; Unable to obtain records; Incorrect advice from the service; Incorrect advice from a tax advisor; Fire, casualty, natural disaster, or other disturbance or Natural disasters.  As with other IRS programs which may benefit the taxpayer, there is a formal process involved in obtaining an abatement.  A tax professional is recommended in completion of this appeal.



Rhonda L. Russell, Principal / Russell Financial & Business Services / NIPR National License # 8728891
Bidwell & Russell Tax Defense, Ltd / Tax Attorney & IRS Audit Representatives
Tax and Estate Planning / Tax Debt Solutions