Taxpayers can negotiate an “abatement” of the penalties. The term “abatement” or “abate” refers to penalty elimination. Under certain circumstances the IRS may agree to abate penalties where “good faith and “reasonable cause” exist. Good faith means your actions, even in error, were not intended to break the law and you possessed a sincere belief you were acting properly. Reasonable cause means that, by applying common sense and considering existing circumstances, you had good reason to act, or good reason for your failure to act.
Use the Right Documents and the Right Message. Use Form 843 as your cover page and complete all information requested. Where it asks for a reason write “See Attached Letter” and then attach your letter to Form 843. Include supporting documents. Keep the originals, and mail the copies by certified mail to attention of “Penalty Abatement Coordinator” at the service center that issued the penalty.
Affidavits may Help Persuade the IRS. Tax attorneys use a very simple document to establish facts. It’s called an affidavit. It is simply a written statement of facts, sworn to and signed before a notary public. Where the IRS has no evidence to the contrary, an affidavit may force the IRS to accept an adverse position as true. A few key words can literally prevent financial ruin.
Don’t Take No for an Answer. You have 30 days from the date of denial to appeal the decision. Experience, persistence and understanding the process at each level get results.
Other penalty solutions exist as well. Taxpayers can wipe out penalties through bankruptcy, or an offer in compromise, or claiming hardship or entering into a partial pay installment agreement. You see, there is usually more than one solution to deal with a tax problem. For more information, get our free book, The Truth about Tax Settlement and Alternative Tax Solutions.