Reasonable Causes To Request Abatement Of Penalties On Late Tax Returns
Some individual tax filers are unable to file a tax return in a timely manner because of circumstances beyond their control. If the delayed return results in a balance due, penalties are assessed on the overdue tax. Late filers with a justifiable reason for the delay may be able to reduce the associated penalties by requesting a penalty abatement.
For late tax returns showing a balance due, a failure-to-file penalty and a failure-to-pay penalty are assessed. If the tax is paid with the return, penalties are assessed on the time period between the due date and the filing date. If the tax is not fully paid with the return, the failure-to-pay penalty may continue. The maximum amount for each penalty is 25 percent of the tax paid late.
The IRS provides Form 843 so that late filers with a valid reason may request penalty abatement. Form 843 contains a small space for an explanation, but it also allows you to attach additional pages. The IRS publishes its own detailed Internal Revenue Manual, so Form 843 can include relevant citations to help justify the specific reason for your request.
Death or serious illness in family
If you were temporarily preoccupied by the death or unexpected illness of an immediate family member, an explanation is included with Form 843 to request penalty abatement. The Internal Revenue Manual provides recommendations for the explanation of such a situation.
Fire or casualty
The destruction of a residence by fire or wind may result in the loss of tax records. If not in a federally declared disaster zone, the circumstances surrounding a fire or casualty are explained in an attachment to Form 843. There is a separate statutory exclusion from late filing penalties for affected persons in an official disaster area.
Inability to obtain records
Individuals sometimes experience difficulty in obtaining essential tax documents from other entities. If the missing information prevented you from meeting your tax obligations on schedule, explain what actions were taken to obtain the information and what responses you received.
Other less common causes are listed in the Internal Revenue Manual. Reasons such as forgetfulness and ignorance of the law have higher burdens of proof. The codification of the manual provides a basis on which to justify abatement requests for eligible tax filers.
The circumstances leading up to a penalty assessment are different for each individual. Contact a tax attorney from a firm like Groskreutz, Schmidt, Abraham, Eshleman & Gerretse CPA for specialized services in regard to tax preparation.