What Is Penalty Abatement (PENAB)?
Penalty abatement is a component of the IRS Fresh Start Initiative aimed at waiving penalties on an overdue tax balance. Although it does not erase the underlying tax debt, it can substantially decrease the total amount owed by thousands of dollars.
The IRS approves penalty abatement solely for reasonable cause, and engaging a tax professional significantly enhances your likelihood of approval. This relief program is recognized as a form of Fresh Start tax assistance.
When Should You Consider Penalty Abatement?
Managing tax liabilities poses challenges due to the continuous accrual of interest and penalties on unpaid balances.
Penalties and interest accumulate daily and swiftly inflate a taxpayer’s total debt with the IRS. This ongoing accrual can create substantial obstacles to completely settling tax obligations, especially when utilizing an Installment Agreement.
TaxRise offers support in securing penalty abatement as part of a comprehensive approach toward achieving financial independence.
What Are the Requirements for Penalty Abatement?
Before qualifying for penalty abatement, you must ensure compliance with the IRS.
Your compliance status hinges on the timely filing of your tax returns. Failure to file renders you non-compliant with the IRS, thereby disqualifying you from penalty abatement or any other relief program under the IRS Fresh Start Initiative.
Once your tax filings are current, you can proceed to request penalty abatement from the IRS.
If you are not eligible for first-time penalty abatement, you must demonstrate reasonable cause for any late payment or filing.
Can I Qualify On My Own?
Yes, you can apply for penalty abatement on your own. First-time penalty abatement is generally easier for taxpayers to obtain.
However, if you’ve previously received penalty abatement and then incurred additional liabilities, interest, and penalties, proving your case to the IRS again will be more challenging.
Penalty abatement is often just one component of a tax relief company’s strategy to help eliminate your tax liability. Consulting with a professional before pursuing this option is advisable, as it can impact your future financial freedom.
What Is The Process of Qualifying?
You can request penalty abatement at any level of the IRS, including an IRS campus, automated collection system, or local IRS offices. Note that a local IRS office can only grant penalty abatements up to $100. Requesting penalty abatement is free.
The IRS requires sufficient evidence to accept a request under the Fresh Start Initiative. When submitting a request by mail, include as much supporting evidence as possible. Documentation is crucial for meeting the strict qualifications of the IRS Fresh Start Program.
Necessary documentation may include doctor’s statements, fire department reports, insurance claims, or family members’ death certificates. Additionally, we recommend including a letter with your Form 843 explaining your situation.
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