The Internal Revenue Service (IRS) imposes penalties on taxpayers who fail to meet their tax obligations, such as filing their tax returns on time, paying their taxes in full, or providing accurate information on their returns. These penalties can add up quickly, so it’s important to understand your rights and options if you believe you have been unfairly penalized.
How to Dispute an IRS Penalty
If you disagree with an IRS penalty, you have the right to dispute it. You can do this by calling the toll-free number at the top right corner of your notice or letter, or by writing a letter to the IRS. In your letter, you should state why you believe the penalty is incorrect and provide any supporting documentation you have.
The IRS will review your dispute and make a decision. If the IRS upholds the penalty, you can appeal the decision to the IRS Independent Office of Appeals (Appeals).
Appealing an IRS Penalty
To appeal an IRS penalty, you must file a written request with Appeals within 30 days of the date of the IRS’s decision. Your request should include the following information:
- Your name, address, and taxpayer identification number
- The date of the IRS’s decision
- The type of penalty you are appealing
- The reason why you believe the penalty is incorrect
- Any supporting documentation you have
Appeals will review your request and make a decision. If Appeals upholds the penalty, you can file a lawsuit in federal court.
Reasonable Cause
In some cases, the IRS may waive a penalty if you can show that you had reasonable cause for failing to meet your tax obligations. Reasonable cause is a defense that can be used to excuse a taxpayer’s failure to file a return, pay taxes, or provide accurate information on a return.
To establish reasonable cause, you must show that you exercised ordinary business care and prudence in determining your tax obligations, but were unable to comply with those obligations due to circumstances beyond your control. Some examples of circumstances that may be considered reasonable cause include:
- Death, serious illness, or unavoidable absence
- Fire, casualty, natural disaster, or other disturbances
- Inability to obtain records
- Mistake of fact or law
- Erroneous advice from a tax professional
If you believe you have reasonable cause for failing to meet your tax obligations, you should include a detailed explanation of your circumstances in your dispute or appeal request.
If you have been penalized by the IRS, you have the right to dispute the penalty. You can do this by calling the toll-free number at the top right corner of your notice or letter, or by writing a letter to the IRS. If the IRS upholds the penalty, you can appeal the decision to the IRS Independent Office of Appeals (Appeals). In some cases, the IRS may waive a penalty if you can show that you had reasonable cause for failing to meet your tax obligations.
How to Get the IRS to Forgive Your Penalties and Interest – Tax Hack
FAQ
Can you negotiate penalties with the IRS?
How do I challenge an IRS penalty?
Can I get out of paying IRS penalties?
What if I don’t pay my tax penalty?
The IRS charges a penalty for various reasons, including if you don’t: We may charge interest on a penalty if you don’t pay it in full. We charge some penalties every month until you pay the full amount you owe. Understand the different types of penalties, what you need to do if you get a penalty and how to avoid getting one.
Do you qualify for tax relief if you owe a penalty?
Reasons that qualify for relief due to reasonable cause depend on the type of penalty you owe and the laws in the Internal Revenue Code (IRC) for each penalty. Reasonable cause doesn’t apply to certain penalties such as the estimated tax penalty. For businesses, the reasons apply to the person with authority to submit the return, deposit, or tax.
What are the most common IRS penalties?
But the IRS also provides several options to get penalties removed, or abated, for people who qualify. There are almost 150 penalties in the Internal Revenue Code, but a few common penalties make up 74% of all penalties. The most common penalties are: Failure to pay penalty – 56% of all penalties, imposed if you don’t pay taxes on time
How much is a failure to pay tax penalty?
This penalty can be as much as 25% of your unpaid taxes. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the IRS reduces the 5% failure-to-file penalty by the amount of the failure-to-pay penalty.