A penalty abatement letter outlines to the Internal Revenue Service (IRS) why you missed the due date for your tax filing or payment and provides you a chance to request penalty relief. By proving you have a reasonable cause for your late filing—such as a medical emergency—with supporting documents, like a doctor’s note or photograph, you may receive financial forgiveness or relief from the IRS.
Many taxpayers often file their taxes or pay any tax debts late when experiencing a disaster or personal emergency. Sometimes our tax issues can be the last thing on our minds when handling life-changing events (like, for example, the death of a loved one, a pandemic, or a serious illness). If you received an enclosed notice from the IRS requesting fines from you, writing a tax penalty abatement letter may be the answer to your problem. But how do you write a penalty abatement waiver?
Why am I receiving tax penalties?
There are three big reasons you could be receiving a penalty: failure to file, failure to pay, or failure to deposit. Each of these has penalties that are calculated in different ways, so be sure you know what penalties are being assessed and for what reason before responding to the notice.
A failure to file means you’ve forgotten to file your tax return on time.
A failure to pay indicates you filed your tax returns but likely owe some money to the IRS and haven’t made a tax payment yet.
A failure to deposit means you haven’t properly paid your employment tax deposits, either by not paying on time, paying the correct amount, or paying the right way.
How will I know if I have a penalty?
The IRS will inform you of any tax penalties owed by letter detailing their reason for the penalties applied. If you have any difficulty reading the letter, or don’t know what the IRS is asking for, check out this online database for further information. This website will also tell you how you can respond to the letter you receive if you disagree with any details included.
Can my tax penalty be waived?
The good news: It can! Your tax penalty can be waived through a couple of different considerations the IRS has in place. There are two major options available: an administrative tax penalty waiver—also known as a first-time penalty abatement waiver—and a tax penalty abatement letter.
A first-time penalty abatement waiver (FTA) can assist taxpayers that have never incurred a penalty or tax debt before.
A tax penalty abatement letter can be written by a taxpayer who receives a penalty letter from the IRS and can provide a reasonable cause as to why they have not filed, paid, or deposited their taxes correctly.
Although sending a penalty waiver letter is simple and straightforward, it is often a good idea to consult with a tax professional when dealing with the IRS. If you are dealing with any other tax debts or concerns, consider getting a free consultation with a tax relief company that hires tax attorneys.
What is a penalty abatement request letter?
A penalty abatement letter is a letter to the IRS in response to any tax penalties you received for one of the transgressions listed above. This correspondence from the IRS lists the calculated fine you owe, the reason you received this penalty, and what caused you to commit this error—this is what we call reasonable cause.
What is a reasonable cause?
In general, a reasonable cause is a random event that turned your life upside down. This would lead you to forget (in this case) to file your taxes or pay any tax debts you owed. (You may have heard of a similar term called a force majeure clause that is often used in legal documents.) There are three categories of reasonable cause: (1) a disaster, (2) a death, and (3) a misunderstanding.
Disasters are naturally occurring events. If your house burned down or was seriously damaged by a flood or earthquake, you could claim you filed late because your financial documents were destroyed.
In this case, “death” is a general term for a medical or personal emergency. This category would apply if your life was impacted by a serious medical condition or if a close family member died during the recent tax year.
Everyone makes mistakes, even a tax professional. The IRS offers a lot of great resources on their website and from their staff, but there’s always a chance some of the information you receive is incorrect. You might fall under this category if a decision you made regarding your tax filing was truly based on incorrect information gathered from the IRS.
If any of these circumstances apply to you, do yourself a favor and write a penalty abatement request letter.
How do you write a penalty waiver letter?
Use the below sample letter as a starting point for writing your own penalty abatement letter:
Sample penalty waiver letter[Recipient Address]
To: Penalty Abatement Coordinator
Internal Revenue Service[Finish the address provided on the penalty letter you received from the IRS.]
Re: Request for Penalty Abatement
From: [Your Name and Address]
To whom it may concern:
(1) I am writing to respectfully request an abatement/a waiver in the amount of $_______, which I received for [state the penalty you incurred] in a letter dated __________.
(2) The reason I failed to [file/pay/deposit] this tax year was due to [explanation of the unavoidable circumstances you experienced and explain how that caused your non-compliance].
(3) I’ve included the following supporting documents to further clarify my situation: [list whatever documents you have to prove the situation stated above].
(4) I apologize for any inconvenience this late filing/payment may have caused, and I would really appreciate any abatement of penalties you can provide.
(5) To make amends for this error, please allow me to [offer something in return for possible abatement, such as sending your tax returns or partial payment. You can also suggest an installment agreement for paying back any tax debts you may owe].
(6) If you need any additional information, you can reach me at (XXX) XXX-XXXX. Thank you for your time.
Feel free to change the wording of the sample letter, but remember to keep it short and direct. If you have any difficulties in writing this, see a tax professional; they’ll be able to help you through this process.
What supporting documents should I include with my penalty abatement?
You’ll need documents that apply to your specific situation. This could range from a picture of you in a neck brace or in the hospital if you were involved in a personal accident, a report filed by the fire or police department, or the death notice of a close family member or friend that passed. If you were offered misleading information from the IRS either through a website posting or an individual, screenshot the website or record the interaction as best you can.
The IRS does not seek out new ways to impose fines on taxpayers, and they may be more understanding than you think.
- You can submit a tax penalty abatement request letter in response to an IRS penalty if you have reasonable cause.
- Reasonable cause includes a natural disaster, a medical or personal emergency, or a misunderstanding incurred through the IRS.
- You can write your own penalty abatement letter using our sample letter above.
- Including supporting documents such as death certificates, photographs, or reports of the incident may encourage the IRS to accept your request for abatement of penalties.
- IRS penalties explained – SuperMoney
- How to respond to letter 3174 – SuperMoney
- IRS tax relief programs that can help you pay off tax debt – SuperMoney
- First time abatement waiver – IRS
- IRS letters and notices – SuperMoney
Samantha Toner is a SuperMoney personal finance writer currently based in Colorado. As a previous graduate student, she understands the special challenges students and graduates face today. She enjoys writing articles discussing getting out of debt, credit cards, and insurance. When she’s not writing, she enjoys exploring Colorado with her pup Koda.