The IRS can impose penalty for various reasons, such as failing to file a tax return or paying taxes late. However, there are situations where the IRS may abate, or forgive, penalties that have been assessed.
One reason why the IRS may abate penalties is if there is what is considered a “reasonable cause” for the penalty. According to the IRS, reasonable cause is defined as circumstances beyond the taxpayer’s control that led to the failure to comply with tax laws.
Some examples of reasonable cause include natural disasters, serious illness or death in the family, or errors made by a third party. If a taxpayer can demonstrate that there was reasonable cause for the penalty, the IRS may waive it.
Another reason why the IRS may abate penalties is when the taxpayer has a history of compliance. If a taxpayer has a good compliance record, meaning they have filed and paid their taxes on time in the past, the IRS may be more lenient in abating penalties for a first-time mistake or oversight.
Additionally, the IRS may abate penalties if the taxpayer has taken steps to correct the issue. For example, if a taxpayer failed to file a tax return on time but then promptly filed once they realized their mistake, the IRS may be more likely to abate any penalties assessed.
It is important to note that the decision to abate penalties is at the discretion of the IRS, and there is no guarantee that they will be waived. Taxpayers who wish to request to know what is reasonable cause for IRS penalty abatement must do so in writing and provide documentation to support their claim of reasonable cause.
It is recommended that taxpayers seek the advice of a tax professional to ensure that they are taking the appropriate steps in requesting penalty abatement.
In conclusion, the IRS may abate penalties for a variety of reasons, including reasonable cause, compliance history, and corrective actions taken by the taxpayer.
Taxpayers who believe they have a valid reason for penalty abatement should take the necessary steps to document their case and seek professional guidance to increase their chances of success.