IRS Penalties
IRS interest penalties often make up the bulk of the delinquent tax bill, and are often the main cause of an unmanageable tax problem. Several IRS provisions allow taxpayers to avoid IRS penalties if you have a good excuse, known as reasonable cause. There is a special provision in the Internal Revenue Manual, IRM 120.1 that regulates the case.
According to the provision, reasonable cause is based on all the facts and circumstances in each situation and allows the Service to provide relief from a penalty that would otherwise be assessed. Reasonable cause relief can generally obtained when the taxpayer stays current in determining his tax obligations while running his business, but is unable to comply with those obligations.
Reasonable cause relief is not available for all IRS penalties; however, other exceptions may apply:
- Any reason, which establishes that the taxpayer exercised ordinary business care and prudence, but was unable to timely comply, will be considered for those IRS penalties where reasonable cause can be applied.
- Taxpayers have reasonable cause when their conduct justifies the non-assertion or abatement of a penalty. Each case must be judged individually based on the facts and circumstances.
- The actual formulating used to report reasonable cause provisions varies. For instance, the evidence that the taxpayer acted in good faith may be required. Also, the taxpayer may be required to proof that it was not due to willful neglect that he failed to comply with the law.
Our experienced tax attorneys carefully examine the special situation of each client to determine whether any IRS penalties might be waived. If so, our tax attorneys aggressively pursue the abatement of IRS penalty.
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