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First-Time Penalty Abatement - IRS Letter Sample
A penalty abatement request letter asks the IRS to remove a penalty for reasonable cause and contains an explanation of your circumstances.
Writing a penalty abatement letter is a straightforward process, yet it's crucial to adhere to the correct procedures to maximize your chances of a favorable outcome.
There are several standard items you should include in a letter to the IRS to request penalty abatement (removal) due to reasonable cause:
- State the type of penalty you want removed.
- Include an explanation of the events and specific facts and circumstances of your situation, and explain how these events were outside of your control.
- Attach documents that will prove your case.
The IRS will review the facts of your case and consider the effort you made to file your tax return and/or pay your taxes on time. The IRS will also consider your prior history of filing and paying your taxes on time.
For example, a taxpayer wants to request penalty abatement because a fire destroyed his records, causing him to file his return after the deadline. In his letter, he would provide the date of the fire and any subsequent events and dates related to his situation. He would explain how he tried to recover the documents necessary to file his tax return. He would also include a copy of the report from the fire department and copies of letters or emails he sent requesting copies of his tax documents.
To request penalty abatement from the IRS due to reasonable cause like the one described, here is a template for the letter:
[City, State, ZIP Code]
[Your Phone Number]
Internal Revenue Service
[Address of Your Local IRS Office]
Subject: Request for Penalty Abatement Due to Reasonable Cause
To Whom It May Concern,
I am writing to request the removal of the [specify penalty type, e.g., late filing penalty] assessed on my [year] tax return. My taxpayer identification number is [Your SSN or TIN].
On [date of the fire], a fire severely damaged my property, including records necessary for filing my tax return. This unforeseen event, which was beyond my control, prevented me from filing my return by the due date. Attached is a copy of the fire department report dated [date], corroborating the incident.
Despite the setback, I made every effort to reconstruct my records. I have attached copies of correspondence with [banks, employers, etc.] requesting duplicates of my tax documents. These efforts demonstrate my commitment to compliance and the challenges I faced in meeting the filing deadline.
I have consistently filed and paid my taxes on time in the past, as my records will indicate. This instance was an unfortunate and uncontrollable exception.
Given these circumstances, I kindly request that the IRS consider abating the penalty applied to my [year] tax return. I am committed to maintaining compliance and ensuring timely filings in the future.
Thank you for considering my request. I am ready to provide any additional information if required.
Fire Department Report
Copies of Correspondence for Record Reconstruction
This letter should be tailored to your specific situation, providing all relevant dates and details. It's also advisable to keep copies of all communications for your records. Consulting with a tax professional for guidance on your specific situation can also be beneficial.
What is a good reasonable cause for penalty abatement?
A compelling reasonable cause for requesting penalty abatement typically involves circumstances beyond one's control that prevent timely filing or payment. Such instances may include being affected by fires, natural disasters, or significant civil disturbances. Additionally, if obtaining necessary records was impossible, or if there was a death, serious illness, or an unavoidable absence involving the taxpayer or their immediate family, these situations can also be considered valid reasons for delay in compliance.
How do I ask the IRS to forgive penalties?
To request the IRS to forgive penalties, you should follow these steps:
- Review IRS Notice: Carefully read the IRS notice you received. It typically contains specific instructions on how to request penalty relief.
- Determine Eligibility: Ensure that your situation qualifies for penalty relief. Common reasons include reasonable cause, like natural disasters, serious illness, or inability to obtain records.
- Gather Documentation: Collect any documents that support your case, such as medical records, death certificates, or documents related to natural disasters.
- Write a Formal Request (if required): Depending on the instructions in the notice, you may need to write a formal letter to the IRS. Include your name, taxpayer identification number, the tax period involved, and a detailed explanation of your circumstances with supporting documentation.
- Phone Request: Some requests for penalty relief can be made over the phone. Check the notice for a contact number and be prepared with all relevant information and documents.
- Consult a Tax Professional: Consider consulting with a tax advisor or attorney. They can provide guidance on the process and help strengthen your case.
- File Promptly: If you haven’t yet filed the return or paid the due tax, do so immediately to prevent additional penalties.
- Be Patient: The IRS review process can take time, so be prepared to wait for a response.
Remember, each case is unique, and the IRS considers various factors, including your history of filing and paying on time. Therefore, providing a clear, honest, and detailed explanation is crucial to your request.