Imagine this: You’ve missed the deadline to file your federal tax return or pay your taxes, and now the IRS is knocking with hefty penalties that could drain your wallet.
These penalties can skyrocket into the hundreds or even thousands of dollars, adding stress and financial strain. But what if there were a way to get those penalties waived? The good news is, there is a way!
This is where taxpayers would need First Time Penalty Abatement. It is a lifeline for taxpayers who usually stay on top of their obligations.
So, let’s dive in and see who does qualify for it. Plus, we will also disclose what it takes to qualify for a penalty abatement IRS, its steps, and usage. Stay tuned!
What is Form 843?
Form 843, Claim for Refund and Request for Abatement, is a tax form used by individuals and businesses to request a refund or abatement of certain taxes, penalties, and interest.
The form allows taxpayers to claim a refund for overpaid taxes or to request relief from penalties and interest if they believe the amounts assessed are incorrect. It can be used for a variety of tax issues, including:
- Tax Refunds: For taxes that were overpaid.
- Penalty Abatement: To request the removal of penalties for reasonable cause.
- Interest Abatement: To seek relief from interest charges due to circumstances beyond the taxpayer’s control.
To use Form 843, taxpayers must provide detailed information about the tax period, the nature of the claim, and the reasons for requesting a refund or abatement.
IRS Audit Fines: What Happens if You Get Audited & Fail?
Being audited by the IRS can lead to various penalties if discrepancies are found in your tax returns.
Here are some genuine penalties that the IRS can impose if issues are discovered during an audit:
1. Failure to File Penalty:
If you don’t file your tax return by the due date, the IRS can impose a penalty of 5% of the unpaid taxes for each month (or part of a month) that a tax return is late. This can go up to a maximum of 25% of your unpaid taxes.
2. Failure to Pay Penalty:
If you don’t pay the tax you owe by the due date, the IRS can charge a penalty of 0.5% of the unpaid taxes for each month (or part of a month) after the due date. This penalty can increase to a maximum of 25% of your unpaid taxes.
3. Accuracy Related Penalty:
If you underpay your taxes due to negligence or substantial understatement of your tax liability, the IRS can impose a penalty of 20% of the underpaid amount. Negligence includes failure to make a reasonable attempt to comply with tax laws or to keep adequate records.
4. Civil Fraud Penalty:
If the IRS determines that underpayment of tax is due to fraud, they can impose a penalty of 75% of the underpaid tax.
5. Failure to Deposit Employment Taxes:
Employers must deposit employment taxes on time. If they fail to do so, the IRS can impose penalties ranging from 2% to 15% depending on how late the deposit is.
| Number of days your deposit is late | Amount of Penalty |
|---|---|
| 1-5 Calendar days | 2% of your unpaid deposit |
| 6-15 Calendar days | 5% of your unpaid deposit |
| More than 15 Calendar days | 10% of your unpaid deposit |
| More than 10 calendar days after the date of your first notice or letter (for example,CP220 Notice) Or The day you get a notice or letter for immediate payment(for example, CP504J Notice) | 15% of your unpaid deposit6. Information Return Penalty: |
If you fail to file correct information returns (such as Forms 1099) or provide correct payee statements, the IRS can impose penalties ranging from $50 to $280 per information return, depending on how late the corrected return is filed.
7. Frivolous Tax Submissions:
If you submit a tax return or claim that contains insufficient information to determine the correct tax, or if the IRS determines that it is intended to delay or impede tax administration, you may face a penalty of $5,000.
Understanding these IRS audit fines can help taxpayers avoid them by ensuring compliance with IRS rules and regulations.
So, if you are getting audited by IRS penalties, it is advisable to seek professional unfiled tax returns help to process it easily.
As one of the top CPA firm in Texas and Austin CPA firm, Hopkins CPA specializes in IRS tax resolution and CPA individual tax preparation, offering personalized support for your tax issues effectively. Contact them today to get the expert help you need.
How to Get IRS Penalties Waived?
IRS penalty abatement is a relief mechanism that allows taxpayers to request a waiver for certain penalties, such as failure to file, failure to pay, or failure to deposit taxes on time.
If you are facing IRS penalties, you should be eligible for First-Time Penalty Abatement (FTA).
To qualify for FTA, you must have:
- Filed all required tax returns or filed an extension.
- Paid, or arranged to pay, any tax due.
- No penalties for the past three tax years before the penalty year.
Now let us look at the steps to request this waiver:
Step 1: Verify Your Eligibility
Before applying, ensure you meet the following criteria:
- Clean Compliance History: No significant penalties (except estimated tax penalties) in the prior three tax years.
- Filing Compliance: All required tax returns or extensions have been filed.
- Payment Compliance: Any tax due has been paid, or you have arranged to pay through an installment agreement.
Step 2: Gather Necessary Information
Collect relevant documentation to support your request. This includes your tax returns, payment records, and any notices from the IRS.
Step 3: Contact the IRS
You can request the FTA by calling the IRS at the number provided on your penalty notice.
Be prepared to explain your situation and provide the necessary documentation. The IRS agent will guide you through the process.
Step 4: Submit a Written Request
Alternatively, you can submit a written request to the IRS. Include the following information:
- Your personal information (name, address, Social Security number, or EIN).
- The tax year and type of penalty.
- An explanation of your compliance history and why you qualify for the FTA.
- Any supporting documentation.
Step 5: Fill Out Form 843
You may also use IRS Form 843, “Claim for Refund and Request for Abatement,” to request penalty abatement. Here’s how to fill it out:
- Section 1: Enter your personal information.
- Section 2: Indicate the tax year and type of penalty.
- Section 3: Check the box for “Abatement” and provide an explanation.
- Section 4: Sign and date the form.
Attach any supporting documentation and mail the completed form to the address provided in the form’s instructions.
Step 6: Follow Up
After submitting your request, follow up with the IRS to ensure it has been received and is being processed. Be patient, as it may take several weeks to get a response.
By following these steps, you can increase your chances of successfully getting IRS penalties waived for the first time, relieving yourself of additional financial stress.
Using IRS penalty abatement form can be a straightforward way to seek relief from IRS penalties, provided you meet the eligibility criteria. If in doubt, consider consulting our experts at the Hopkins CPA Firm for professional tax resolution services.
Hopkins CPA Firm goes beyond tax resolution, too. If it’s any help, get their assistance in tax preparation services in Texas (and nationwide) to guide you through the process.
How to Use Form 843 for First-Time Penalty Abatement?
Form 843 i.e., the Claim for Refund and Request for Abatement form is used to request the reduction or elimination of certain IRS penalties, including the First-Time Penalty Abatement (FTA).
Following are the detailed steps to file Form 483 for First-Time Penalty Abatement:
1. Obtain Form 843:
Download the form from the IRS website or request a copy by calling the IRS.
2. Provide Your Personal Information:
Fill in your name, address, and Social Security Number (SSN) or Employer Identification Number (EIN) at the top of the form.
3. Specify the Type of Tax:
Indicate the type of tax (e.g., income, employment) and the tax period (e.g., the year for which you are requesting abatement) in Part I of the form.
4. Explain Your Request:
In Part II, check the box for “Request for abatement” and provide a detailed explanation in the space provided.
State that you are requesting First-Time Penalty Abatement and mention your clean compliance history for the past three years, the timely filing of all required returns, and your payment compliance.
5. Identify the Penalty:
Specify the type of penalty you want abated, such as failure to file, failure to pay, or failure to deposit, and the amount of the penalty.
6. Attach Supporting Documentation:
Attach any supporting documents that validate your claim. This may include copies of previous tax returns to show your compliance history and proof of timely filing or payment.
7. Sign and Date the Form:
Sign and date the form at the bottom to certify the accuracy of your request.
8. Mail the Form:
Send the completed Form 843, along with any supporting documentation, to the address specified in the form’s instructions. Typically, this is the same IRS office that sent you the penalty notice.
9. Follow Up:
After mailing your form, keep a copy for your records and follow up with the IRS if you do not receive a response within a reasonable time frame. You can call the IRS to check on the status of your request.
By carefully completing Form 843 and providing all necessary information and documentation, you can effectively request First-Time Penalty Abatement from the IRS. But, if it sounds too much trouble to do alone, get immediate help from Hopkins CPA Firm.
Understanding Reasonable Cause for IRS Penalty Abatement
When facing IRS penalties, understanding the concept of “reasonable cause” can be a crucial factor in getting those penalties abated.
The IRS acknowledges that certain circumstances may prevent taxpayers from meeting their tax obligations.
In this section, we’ll explore what constitutes reasonable cause that can help you get penalty abatement:
- Serious illness or death: If you or a close family member were seriously ill or died, causing you to miss tax obligations.
- Natural disasters: Events like hurricanes, floods, or fires that disrupted your ability to file or pay taxes.
- Inability to obtain records: If you couldn’t get the necessary records despite trying.
- Mistaken advice: If you relied on incorrect advice from a tax professional or the IRS itself.
- Other significant events: Any other situation beyond your control that made it impossible to comply with tax obligations.
If you’re seeking expert assistance with penalty abatement IRS and need guidance on reasonable cause, consider reaching out to Hopkins CPA Firm.
How to Write a First Time Penalty Abatement Sample Letter?
If you want to apply for an abatement by mail rather than by phone, you’ll need to know how to write a penalty abatement letter. We’ve provided a penalty abatement letter sample below for you to reference and modify.
Example 1: IRS first time penalty abatement sample letter
[Your Name]
[Your Address]
[City, State, ZIP Code]
[Date]
Internal Revenue Service
[Address of the IRS Office]
Subject: Request for FirstTime Penalty Abatement
Tax Year: [Year]
SSN: [Your Social Security Number]
Dear Sir/Madam,
I am writing to formally request the abatement of penalties assessed for the tax year [Year] under the FirstTime Penalty Abatement (FTA) policy.
I have consistently filed and paid my taxes on time and have not incurred any penalties in the past three years. Due to unforeseen circumstances, I missed the deadline for [filing/paying] my taxes for the mentioned tax year. I have since rectified the situation and ensured that all tax obligations are current.
I have enclosed Form 843 along with this letter for your review. Your consideration of my request is greatly appreciated.
Sincerely,
[Your Name]
[Your Signature]
Filing IRS Form 843 and drafting a well-articulated request letter can significantly improve your chances of obtaining penalty abatement.
Consulting with a tax resolution firm or a tax preparation for business service can also provide additional guidance and support.
Final Tips to Avoid your IRS Audit Fines
Avoiding IRS audit fines starts with filing accurately and on time. Ensure all your tax returns are correct and submitted by the deadline to avoid late-filing penalties. Keeping detailed records is also crucial; maintaining thorough documentation of all income, deductions, and credits will support your tax return in case of an audit.
Review and double-check your tax return before submission to catch any errors or omissions. Reporting all income, including minor sources or cash payments, is essential to avoid discrepancies that could trigger fines.
If you’re unsure about any aspect of your tax return, consulting a professional is a wise move. For expert assistance, consider reaching out to Hopkins CPA Firm. They are the most experienced Tax Relief Resolution team in America, with over 150 years of IRS experience!
