Taxpayers sometimes face penalties for filing their taxes late. These penalties can add up quickly, causing financial stress. Fortunately, taxpayers have ways to challenge these penalties if there is a reasonable explanation for the delay.
Understand reasonable cause
The IRS may waive penalties for late filing if there is reasonable cause. This means taxpayers need to prove their delay was due to circumstances beyond their control, such as a natural disaster, serious illness, or records being inaccessible. Documenting these reasons well helps when making a case to the IRS.
Use the first-time penalty abatement
First-time penalty abatement (FTA) is an option for taxpayers who have a clean filing record. Taxpayers may qualify for FTA if they had no penalties for the three tax years before the penalty year. This method can be a straightforward way to eliminate late filing penalties for those who meet the criteria.
Request an appeal
Taxpayers who disagree with the penalty can also request an appeal. This involves sending a formal request to the IRS Office of Appeals. During the appeal, taxpayers need to present all relevant information to support their claim that the penalty is not appropriate. Being organized and providing solid evidence improves the chances of success.
File a penalty appeal through Form 843
If initial attempts to remove the penalty fail, taxpayers can file Form 843, “Claim for Refund and Request for Abatement.” This form allows taxpayers to formally ask the IRS to reconsider the penalty. It is crucial to provide thorough documentation supporting the reasonable cause claim. The IRS will review the request and decide whether the penalty should be reduced or removed.
To avoid future penalties, taxpayers should file their returns on time and seek professional tax advice if needed. Being proactive with tax compliance and understanding penalty relief options can help ease the burden of IRS penalties.