Columbus, Ohio Tax Lawyer
If you fail to file a federal income tax return or pay tax, you may face a formidable assortment of civil tax penalties. The Internal Revenue Service (“IRS”) officially views a civil tax penalty not as a punishment, but as a means of encouraging voluntary compliance with the tax laws. I.R.M. 220.127.116.11.
Depending on the type of civil tax penalty, the IRS will remove or abate a civil penalty where you can demonstrate reasonable cause and not willful neglect. This article outlines the basic types of tax penalties and defenses available to taxpayers.
Practice Pointer: If you qualify as a first time “offender,” your tax penalty may be removed based on your compliance history rather than on any reasonable cause information. See the First Time Abate (FTA) procedures at I.R.M. 18.104.22.168.6.1.
Types of Civil Tax Penalties and Defenses
A civil tax penalty will likely fit into one of four categories: (i) failure to timely file a return; (ii) failure to timely pay the amount of tax liability owed; (iii) failing to adequately prepay the correct amount of tax liability (estimated tax penalty); and (iv) accuracy-related penalties for not reporting the correct amount of tax on the return.
An abatement is a reduction of assessed penalties. Generally, the IRS may approve an abatement of a civil tax penalty for IRS error, reasonable cause, administrative and collection cost not warranting collection of penalty, discharge of penalty in bankruptcy, and the IRS’s acceptance of a partial payment of assessed penalty. If the tax penalty has been assessed and paid, a taxpayer could file a refund (abatement) on Form 843.
Reasonable Cause Relief
The first two tax penalties, commonly called the delinquency penalties, can be avoided upon a showing that the lateness was reasonable under the circumstances, and that you did not willfully neglect your responsibilities. There is no reasonable cause exception to the estimated tax penalty. Finally, an accuracy-related penalty can be avoided if the taxpayer had reasonable cause for the position taken and acted in good faith or if there was substantial authority for a substantial understatement.
Tax Lawyer in Columbus, Ohio
IRS Tax Penalty Abatement Representation
Porter Law Office, LLC is a boutique tax controversy law firm that assists taxpayers with resolving tax debts with the IRS. If the IRS has assessed civil tax penalties against you or your business, Porter Law Office, LLC can help you determine whether filing a penalty abatement request is appropriate. Knowing your options is key to resolving your tax issues. Columbus, Ohio tax lawyer Matthew R. Porter, J.D., LL.M. has experience with obtaining relief from IRS civil tax penalties. Contact Mr. Porter today for a free consultation to discuss your IRS civil tax penalty.
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Helpful IRS Civil Penalty Resources