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IRS Penalty Abatements

How successful have you've been at reducing or eliminating the absurd penalties the IRS assesses your businesses (or your persons)? Have you used the IRS guidelines: http://www.irs.gov/irm/part20/irm_20-001-001r-cont01.html ? They talk about "reasonable cause exception". Have you found them reasonable?

Answers

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

I have had more luck with the states in reducing penalties, fees and interest. The IRS is a little direct and prescriptive with their penalties. I have learned that almost all tax agencies tend to now assess and rather than spend time looking at how we applied the law, as they start negotiating using data from their flawed findings. This has happened a couple of times. We have found it to be just laziness on the part of the agencies.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I don't think its laziness, its a calculated methodology to increase the coffers.

It's the same thing done by utilities, multilevel call in menus, long wait times, longer wait times for supervisors or magically no supervisor there and you'll have to get a call back which doesn't come.

The squeaky wheel has a better chance at amelioration than someone who just "agrees".

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

I am in the middle of this very situation with two entities accounting records we keep. The first entity was filed timely but the IRS had a system error on April 15, the CPA resubmitted successfully on April 16. They sent a letter to the IRS requesting abatement at the time, explaining what happened. In June I received a penalty notice for $12,000.

The second entity's penalty I am trying to get abated is a $1,200 penalty for a nonprofit we manage. The CPAs actually failed to execute the extension. Hopefully the IRS will be gracious with this one.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

The CPA is probably responsible for the $12K, professional negligence. That's why they pay insurance :)

Patrick McDermott
Title: Partner
Company: McDermott
(Partner, McDermott ) |

We write a number of the reasonable cause letters each year. The guidelines are readily available on line, so just check the list and see if you qualify and send the letter. These take time, and there most likely will be another follow up notice while you are waiting. That would be the best time to call in and put a hold on the account until it is resolved.

Our success rate is very high as long as the cause meets the criteria. Very rare to get abatement when the cause is weak or not well explained/thought out.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

And sometimes it just pays to give Cesar his due; for the investment to argue just isn't worth it.

I received a $14.04 bill from the IRS. It cost them more than that to generate, process, etc. Same here, I just paid it.

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