We have compiled helpful answers into two groups for you:
- Quick Q&As with brief answers.
- Questions that require more detailed answers, of which we linked to their own pages.
Quick FAQs
What happens if I refuse to pay a penalty assessment?
You run the risk of enforced collection – that is, a lien and/or levy. Also, if you owe (taxes, interest, and penalties) more than $53,000 (adjusted annually each November for inflation), the IRS may send a notice to you and the State Department that you have seriously delinquent tax debt. The State Department can use this information to restrict, deny, or revoke your passport. Also, the IRS can send your account for private debt collection.
How do I know if I have been assessed penalties by the IRS?
The IRS will send a notice that shows the type and amount of penalties assessed. However, the taxpayer can also review their account transcript for the year in question. The account transcript will show the amount of assessed late filing and accuracy penalties. The account transcript will also show the initial assessed failure to pay penalty. Taxpayers who have unpaid balances need to contact the IRS directly to get the current accrued amount of the failure to pay penalty.
Will the IRS forgive interest?
Interest abatement is rare and difficult to qualify for. It usually requires that the IRS delayed processing of a request that caused additional interest to be owed. However, if the taxpayer is successful in abating a penalty, the associated interest on the unpaid penalty is also abated.
Which types of penalties can I use first time penalty abatement?
FTA applies to three types of penalties: failure to file, failure to pay, and failure to deposit. FTA does not apply to accuracy penalties and estimated tax penalties. FTA applies to most income tax returns (1040, 1120, 1120S, 1065) and employment tax returns (940, 941). FTA does not apply to event-based returns such as estate and gift tax returns. FTA also does not apply to late filing of tax-exempt returns (Forms 990 and 990-T).
What is the difference between requesting non-assertion of the penalty and requesting penalty abatement?
Penalty relief requests are either non-assertion requests (i.e. a request before the penalty is assessed) or a penalty abatement request (i.e. a request after the penalty is assessed). Non-assertion requests are proper in audits and CP2000 notices where the IRS “proposes” a penalty and the taxpayer contests the penalty not be asserted. Penalty abatement requests are generally for failure to file and pay penalty relief.
What IRS phone number can I call to request penalty abatement?
Taxpayers can call the number of the notice. For assessed failure to file and pay penalties, the taxpayer can also call the IRS Penalty hotline at (855) 223-4017, extension 225.
What form do I use to request penalty abatement?
When requesting abatement of late filing and late payment penalties, you can use Form 843, Claim for Refund and Request for Abatement, or a penalty abatement request letter – both will work to request abatement.
How long does it take for the IRS to make a penalty abatement determination?
The IRS usually takes 2-3 months to make an initial determination on penalty abatement requests for the failure to file or pay penalty.
How can I contest an accuracy penalty?
The IRS can propose an accuracy penalty during an audit or CP2000 underreporter inquiry. To contest the penalty, the taxpayer needs to show the IRS that they made a reasonable attempt to properly file an accurate tax return. Reliance on a tax professional, lack of information statements (W-2s, 1099s) or records, and reasonable ignorance of the tax law are common arguments. Taxpayers need to contest the penalty during the audit or CP2000 process before the penalty is assessed. Taxpayers can appeal the proposed penalty to the IRS Independent Office of Appeals if they do so within 30 days after receipt of the IRS auditor’s 30-day letter.
Can I request that the IRS not assess a late filing penalty when I file my late return?
Yes- this is called a “non-assertion” request. However, the IRS sometimes ignores the request with the late return, requiring the taxpayer to also request abatement after the penalty is assessed.
I filed late, why did I not get a late filing penalty?
There are generally two reasons for not receiving a late filing penalty: there is no tax due with the return or the taxpayer was given relief for late filing because they were in a Presidentially declared disaster area.
Can I request abatement of a late-filed international information return penalty (Form 5471, 3520, etc.)?
Yes. Late-filed returns or amended returns filed with international information return penalties qualify for penalty abatement due to reasonable cause. In many instances, the IRS allows relief if the taxpayer is in compliance (filed all returns, paid all taxes or in a payment agreement) if there is no tax liability related to the late filing and the taxpayer has reasonable cause. Taxpayers should follow the IRS’ Delinquent International Information Return Submission procedures to request abatement.
How long does it take to appeal an adverse penalty abatement determination?
The entire appeals process (from the appeals request to final decision) can take up to a year or more. Most are completed within a year. Taxpayers can follow up on the status of their appeals request by calling the IRS appeals appointment hotline at (559) 233-1267.
Why do I need to request audit or CP2000 reconsideration for an assessed accuracy penalty?
Audits and CP2000 underreporter notices can assess additional taxes along with a 20% accuracy penalty. IRS procedures (called deficiency procedures) allow the taxpayer the right to contest the additional tax, and any penalty, prior to assessment and collection. In an audit or CP2000, the IRS will offer two appeals before the penalty is assessed- an appeal within the IRS Independent Office of Appeals and the ability to petition the US Tax Court. If taxpayers miss the time period to appeal, the IRS will assess the penalty. The taxpayer can informally request audit or CP2000 reconsideration to have the penalty abated. During the reconsideration, the taxpayer will provide their argument to show that they made a reasonable attempt to file an accurate return. The taxpayer can also pay the penalty and follow the more formal “claim for refund” procedures to request that the IRS remove the penalty.
Expanded FAQs
Click on any question below for a detailed answer.
- How do I know if the IRS has received my penalty relief request?
- The IRS denied my penalty abatement request. What should I do next?
- How long does it take to get penalty relief?
- What reasons will the IRS accept for penalty relief?
- What returns qualify for first-time penalty abatement?
- What are the IRS penalty rates?
- How does first-time penalty abatement work?
- How far back can I request penalty abatement?