How to Address IRS Penalties
IRS penalties, at a glance:
- There are many types of IRS tax penalties.
- Reasonable cause and first-time abatement are the most common ways to get penalties removed.
- It’s common to have to appeal penalty relief denials to get the IRS to look at your specific facts.
You can get expert help with IRS tax penalties.
What you need to know about IRS penalties
The IRS issues about 40 million penalties each year. There are almost 150 types of IRS penalties, but the most common ones are caused by late filing and late payment.
The IRS offers four options for taxpayers to get their penalties removed — if the circumstances fit.
You or your tax professional will need to investigate which options you may be able to use, and request penalty relief from the IRS.
Here’s how it works.
How to address IRS penalties
1. Understand your options, based on your facts.
- Tax penalties are based on the taxes you owe, so make sure you get the tax right first. Start by double checking your return. Consider amending your return if the taxes are incorrect.
- Understand the four penalty abatement options:
- IRS error
- Specific legal exceptions to penalties
- Reasonable cause
- Administrative waivers
- Get the facts on your penalties:
- Penalty type(s)
- Amounts owed
- Year(s) involved
- Based on your situation, identify which penalty relief options you can use. Keep in mind that more than one option may be applicable.
2. Request penalty abatement from the IRS.
- Put together your penalty abatement request for the specific option you’re pursuing.
- Send your request to the proper unit at the IRS.
- Use the right method to submit your request
- If you’ve already paid the penalty, you may have to submit a claim-for-refund form.
- If you’re requesting an administrative waiver for penalty abatement, you may be able to handle the request with a phone call to the right IRS function.
- Respond quickly to any IRS requests for documents supporting your abatement request, and be prepared to argue the merits of your position.
- If the IRS denies your request, appeal the decision by the deadline, and argue your position with the IRS Appeals Office.
3. If the IRS denies your request, appeal the decision by the deadline, and argue your position with the IRS Appeals Office.
- Most appeals requests should be filed within 30 days of the IRS denial of the original appeal.
- You’ll need to provide a chronology of events that caused you to file or pay late. Be specific on dates and provide backup documentation to support your chronology.
- You may need to provide the IRS with additional legal arguments, such as a court case that supports your position.
- The IRS will ask you how the unforeseen events affected your life and/or work. Be prepared to show how you couldn’t perform other critical tasks, such as making necessary payments for bills and utilities, and meeting personal and work obligations.
4. Prevent future penalties.
- Make sure you file accurately and pay your taxes on time in the future.
- If you have penalties related to late payments, adjust your withholding and/or make estimated tax payments.
How to get expert help
Your H&R Block tax professional can help you figure out which penalty abatement option you can pursue – and help you request it from the IRS.
Bring these five items to your appointment
- A copy of your IRS notice(s)
- A copy of the tax return in question
- A chronology of the events surrounding the time of the issue
- A history of any past penalties
- Documents that support your reason for abatement
Learn more about letter 1830 and how to handle an adjustment to your partnership's return with help from the tax experts at H&R Block.
Learn about underreported business income. Read the IRS definition and get more insight from the tax experts at H&R Block.
Learn what the IRS is looking for during an audit, the steps you should take to prepare for an IRS audit, and when it's best to get expert help.
Learn more about letter 4314C, why you received it, and how to handle an IRS 4314C letter with help from the tax experts at H&R Block.