IRS Penalty Abatement Sample Letter
Contrary to what you may have heard, the IRS does not want to penalize everyone who misses their taxes. They would rather make arrangements to reduce tax debt and receive what you owe for a given year. You often have to pay a penalty first, and several more, before the IRS takes drastic action. Many taxpayers would rather handle the penalty if they miss a payment on their tax return.
If you owe back taxes to the Internal Revenue Service (IRS) and have recently been assessed a penalty for this debt, you are allowed to request relief for this penalty if you have a valid reason. While the IRS may not make the process simple, we can provide the details. This relief is called a penalty abatement.
What Is Penalty Abatement
Penalty abatement is an administrative waiver that the IRS gives to people who miss a tax payment. This tends to be a first-time basis, so people that don’t pay for several years or tax periods may not have access to this resource. You also are getting a waiver on the penalty itself rather than the taxes you owe.
You can get first-time penalty abatement for the following situations: failure-to-file, failure-to-pay or failure-to-deposit penalty. Essentially, if you miss a payment, don’t file a tax return, or make a deposit, then you have a chance to avoid the penalty. You can’t get the first-time abatement for other circumstances.
There are two ways to apply for penalty abatement. You can either draft a letter and send it, or call the IRS and talk to one of their agents We recommend sending a letter so that you have a paper trail and documentation. Also, you won’t be waiting on hold for hours at an end and dealing with an agent that has to sift through their policies. Only call if you cannot wait for the time it takes to send a letter either by post or overnight.
Drafting A Penalty Abatement Letter
Applying for penalty abatement is fairly straightforward. You can qualify for this relief if you provide and fulfill one of the following requirements:
- You did not previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty (first-time penalty abatement).
- You filed all currently required returns or filed an extension.
- You have paid, or arranged to pay, any tax due.
- You have reasonable cause for why you are unable to pay these penalties.
Accountability is key. You have to prove that you have paid your debts and want to not evade further accumulated payments. If not, then the IRS may have reason to believe that you are trying to skip a payment altogether. That would give them a valid reason to deny your request. Use a tax professional or an installment plan to handle any lingering debt.
How to Write a Letter of Explanation to the IRS (With Samples)
If you are requesting a penalty abatement for a reasonable cause, you can use the sample letter below to help write your request. You should always address this correspondence to the Internal Revenue Service and send it to the address listed on the written notice of the tax due:
IRS Penalty Abatement Sample Letter Template
To: Internal Revenue Service
Penalty Abatement Department
City, State, Zip Code
Date: [ENTER DATE]
To Whom It May Concern:
I am writing to respectfully request the abatement of penalties, totaling $[ENTER DOLLAR AMOUNT] that was assessed related to the attached notice dated [ENTER DATE OF NOTICE].
The primary reason that…[CHOOSE 1 OF THE FOLLOWING THAT BEST APPLIES TO YOUR SITUATION]:
- I paid late
- I filed late
- I failed to report income
Was because….[CHOOSE 1 OF THE FOLLOWING THAT BEST APPLIES TO YOUR SITUATION]:
- I suffered from a serious medical condition
- I suffered a catastrophic event (ie. your house burned down or all of your tax materials were stolen)
- A close family member died
- Other (significant event or “reasonable cause”)
Please find attached documents which further detail the circumstances that prevented me from (paying late/filing late/failing to report income).
[Note: You should attach all relevant supporting documents including letters from physicians, death notice, pictures, and any other documents that can support your position.Keep backup copies on hand or digital duplicates, and never sent originals. You never know what may get lost in the mail.]
Please accept this petition for abatement of penalties due to reasonable cause. I can be reached at [ENTER PHONE NUMBER] with questions or if you need additional information. You will also find the payment of the taxes that I owe, minus the penalties assessed.
[Note: You do not have to include payment but the IRS will generally look at your request more favorably if you can. If you cannot make your payment, consider applying for an installment agreement or offer in compromise.]
[ENTER FIRST AND LAST NAME]
When you are ready, draft your letter. Then consult with a tax professional, and send it in a timely manner. Decide if you want to use USPS, FedEx or UPS; there may be a time to use overnight express mail to get that penalty relief.
You should prepare for the rare case when you get turned down. There could be various reasons, such as bureaucracy or semantics. Prepare to go to Appeals if the IRS refuses to hear you out. If you already paid the penalty, you can file form 843 to get a refund. There are viable options when relief doesn’t go according to plan.
Get Tax Support When You Need It At Success Tax Relief
Success Tax is filled with professionals who want to assist with your finances and IRS troubles. We can help with penalty abatement requests, applications for installment agreements, filing an Offer in Compromise, as well as traditional tax support and support during an IRS audit. Our tax professionals also take a look at your finances to see where we can optimize. We can find out how to help you pay less on debts and to find the best options for your business.
If you have questions about this sample letter, or would like to partner with a reputable and trusted full-service tax firm that can help you navigate this process, contact the team at Success Tax Relief to speak with a member of our team. We will be very happy to help you with your finances. Contact us for a free consultation today!