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Penalty abatement is a tax resolution tool that temporarily stops the accumulation of additional penalties and fees for an outstanding tax debt. It can be obtained if there are events that may affect the outcome of a further investigation. Three situations may result in receiving a penalty reduction: death in the family, clerical error, or outdated/incorrect information from a tax professional. Taxpayers should work with tax agency representatives to determine if they qualify for a penalty reduction.
A penalty abatement is a type of tax resolution tool that allows you to temporarily stop the accumulation of additional penalties and fees associated with an outstanding tax debt. A tax abatement can generally be obtained if the circumstances surrounding the current debt include events that the tax agency believes might affect the outcome of a further investigation into why there is an outstanding balance. Most local and national tax agencies have at least some provisions for issuing a reduced penalty, although many taxpayers are unaware that these provisions exist.
While regulations regarding the issuance of a penalty reduction vary from tax agency to tax agency, there are three situations that may result in receiving this type of temporary break in fee and penalty accrual. One has to do with a death in the immediate family. If the agency determines that the death has created a sufficient level of confusion within the household that it is not possible to focus on the tax issue for a period of time, the abatement avoids the application of penalties for a defined period of time.
A penalty reduction may also be granted if there is evidence of some type of clerical error on the part of the tax agency that delayed the processing of the original return or otherwise affected the accurate assessment of taxes. In this scenario, the reduction remains in effect until the tax agency resolves the issue and has confirmed the truth of the amount originally claimed as past due, or has adjusted the taxpayer’s account to reflect a revised amount of tax due.
There are also some cases in which a penalty reduction may be granted if there is any evidence that the taxpayer filed the return based on outdated or incorrect information provided by a tax professional. Here, the assumption is that the taxpayer acted in good faith, using information provided by an expert. If the tax agency can determine that the inaccurate advice was obtained from a qualified third party, the abatement may be granted as a means of waiving penalties and penalties, provided the taxpayer files an amended return that is accurate and pays the balance due within one specified time period.
To determine if a penalty reduction is possible in a given situation, taxpayers should work closely with tax agency representatives. Representatives can help taxpayers understand their rights regarding qualification for this type of abatement, and what responsibilities they assume in exchange for receiving a waiver of penalties. In many cases, the reduction provides a period of time to clear up any miscommunication and allow the tax issue to be resolved to the satisfaction of all concerned.
Smart Asset.
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