IRS PENALTY
REMOVAL CASES
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The IRS will remove
penalties in certain circumstances but will not remove interest. To qualify for
penalty removal, you will need to provide evidence that you did not comply with
your tax obligations due to reasonable causes and not due to willful neglect.
If you do not qualify for penalty abatement due to reasonable cause, you
may still be eligible for First Time IRS Penalty Removal.
We review every
client’s case for IRS Penalty Removal and fully evaluated the situation to
determine if the stated reasons fit the rules for IRS Penalty Removal. If you
do qualify, we will build a comprehensive case under the IRS guidelines for IRS
Penalty Removal.
IRS PENALTY REMOVAL –
INDIVIDUAL CASE
Problem
The client claimed too many exemptions on wages. As a result, the client did
not pay sufficient federal withholdings and owed about $10,000 in taxes,
including about $2,500 penalties. The client hired us to prepare the
current-year tax return and help with the tax balance.
Relief Steps
1. We helped the client
prepare and submit a letter discussing the impact of the spouse’s passing. The
letter explained why the taxpayer failed to comply with the tax obligations due
to reasonable cause and not due to willful neglect.
We added the First Time IRS Penalty Removal Provision language
in the letter. The client could still qualify for First Time IRS Penalty
Removal if the IRS did not accept the reasonable cause.
2. The IRS agreed to
remove all tax penalties.
3. We reviewed the
client’s account to confirm IRS Penalty Removal and noticed that some but not
all of the penalties had been removed.
4. We called the IRS
Service Center for an explanation. After some discussion, we submitted a new
letter.
5. The IRS did not adjust
the client’s account in a timely manner, so we called the IRS Taxpayer Advocate
for assistance.
6. All IRS penalties were
removed.
Results
The client was happy
with the results. The amount of penalties removed more than covered the fees
for our tax resolution and preparation services. We continue to work with
the client by preparing yearly personal income tax returns.
IRS PENALTY REMOVAL –
SELF-EMPLOYED CASE
Problem
The self-employed client owed about $12,000 in back taxes. This included about
$2,500 of tax penalties. The client had not filed a tax return for the past two
years. We were hired to prepare the missing tax returns, address the tax
penalties, and set up an IRS arrangement.
Relief Steps
1. We thoroughly analyzed
the client’s IRS tax account and found that the client qualified for First
Time IRS Penalty Abatement.
2. We prepared the
missing tax returns. The client was owed a refund for one of the missing tax
returns and owed less than $10,000 for the other missing return
3. The IRS accepted our
request for the first time penalty abatement. The IRS removed about $2,500 in
penalties. This resulted in the client owing about $7,500 to the IRS.
4. We called IRS and
arranged a 72-month installment agreement for the client at $150 per month.
Results
The client was happy
with the results. The penalties removed more than covered our fees for
preparing the tax returns and requesting penalty abatement relief. We continue
to work with the client, preparing yearly personal income tax returns.
IRS PENALTY REMOVAL –
BUSINESS CASE
Problem
The client owned a
business that was started by the client’s spouse. The client’s spouse passed
away from cancer after many years of fighting the disease. The client was
deeply affected by this loss. The client kept the business running but did not
have the same passion for the business as the spouse had had. The business
began to falter, so this client cashed out a 401K to keep it going, which
caused a $55,000 tax balance. The client did not qualify for a Tax
Settlement. The client could afford an IRS Installment Agreement but
wanted some tax relief for $12,000 of failure to pay IRS penalties.
Relief Steps
1. We helped the client
prepare and submit a letter discussing the impact of the spouse’s passing. The
letter explained why the taxpayer failed to comply with the tax obligations due
to reasonable cause and not due to willful neglect.
We added the First Time IRS Penalty Removal Provision language
in the letter. The client could still qualify for First Time IRS Penalty
Removal if the IRS did not accept the reasonable cause.
2. The IRS agreed to
remove all tax penalties.
3. We reviewed the
client’s account to confirm IRS Penalty Removal and noticed that some but not
all the penalties had been removed.
4. We called the IRS
Service Center for an explanation. After some discussion, we submitted a new
letter.
5. The IRS did not
promptly adjust the client’s account, so we called the IRS Taxpayer Advocate
for assistance.
6. All IRS penalties were
removed.
Results
The IRS initially
removed $2,000 of tax penalties. We then fought to get the remaining $10,000 of
tax penalties removed.