Follow the instructions in the IRS notification you received. Taxpayers can request exemption from fines. For not filing or paying the penalty, taxpayers can request that the IRS “reduce the penalties.” The reduction simply consists of eliminating fines once they are imposed on the taxpayer. Fines for lack of presentation (FTF) and non-payment (FTP) generally require a reduction, since the IRS evaluates these fines electronically (through its computer systems) when a return is filed or a transaction is made with the balance due.
The IRS offers exemptions for specific tax penalties, usually in cases where the taxpayer is unable to file or pay on time. However, the reduction must be based on reasonable cause, a first-time sanction, or an administrative or legal exception. You may not get a reduction because you forgot or because you don't have enough money to pay. Estimated tax penalties cannot be reduced with the FTA exemption.
This is good practice because the customer may need to use the FTA exemption for a subsequent year, and the reduction for reasonable cause will not disqualify the customer from receiving an FTA. For now, if the client meets the requirements, the professional can effectively request and receive compensation for the client's penalties using this beneficial and largely unknown administrative exemption. To comply with the rule of a clean penalty history, the customer cannot have been fined a “significant amount of 13%” in the previous three years on the same tax return for which the customer requests a reduction. Be prepared by researching the customer's clean compliance history and applying qualifying rules before contacting the IRS.
If you qualify for any other IRS tax resolution program or agreement, the penalty waiver does not apply. To uniformly apply fine reductions, the IRS developed a decision-making support software program called Reasonable Cause Assistant (RCA). Fines are severe and can add up, making it difficult to balance the balance with accumulated fines. Now that you've completed the reasons why the IRS would forgive the fines, it's time to sum it all up and make the request.
If you expect to get a tax penalty exemption from the IRS, you must establish the facts of your case and obtain supporting documents for your cause. To determine if there is reasonable cause, instead of accepting an oral request, the IRS may require taxpayers to submit documentation supporting their claim. We approved the relief for the first time for the amount of the additional penalty accrued up to the date the tax was paid in full. When the taxpayer or professional calls or writes to the IRS to request an FTA, the IRS evaluates the request using an automated tool.
