March 9, 2013 by Jay Freeborne

This week we got the IRS to abate and refund about $15,000 in penalties (and interest which accrued on the penalties)  for a client. The experience helped clarify for us what really makes a winning penalty abatement case with the IRS.  This client in Michigan had paid the IRS in full about a year ago. And we were trying to recover the penalties that he paid.


Tax issue:  years 1996 thru 2002

Amount owed: $0 -- client had paid in full.

Solution: Requested that the IRS refund penalties taxpayer had paid in full.

Let's review the strengths and weaknesses of this case:

1. Strength - IRS paid in full.

2. Strength - Client had filed and paid his taxes on time from 2004 thru 2011 after he owed the taxes.

3. Strength - Client had a medical issue - herniated disc and multiple other issues - that decreased his pay and also affected his tax compliance.

4. Strength -When client knew that he was going to owe taxes he was afraid to file -- we throw this under "Ignorance of the Law."

5. Strength - Client took action after the IRS levied him. He filed all his returns and set up a payment plan with the IRS without delay.

6. Weakness -- client owed for almost 7 years - 1996 1997 1998 1999 2000 2001 and 2002. 

When requesting a penalty abatement: you generally want to have as few weaknesses as possible -- otherwise - you are going to lose. This taxpayer owed a lot of years. But he was strong in all of the other areas.  In our opinion - if he would have ONE more weak issue on his case: he would have lost, i.e. Two Strikes and you are out! 

We will also add that for people that owe the IRS only ONE TAX YEAR -- there is an exception to the above rule. Many penalty abatement cases for ONLY ONE YEAR win regardless of the weaknesses. But when you owe for two years or more - you want to see a much higher weighting of strengths to weaknesses.

You can read about other successful penalty abatements we've done and more on this issue below:

Index of Penalty Abatement Articles: Tax Resolution Blog

What kind of tax problem do you have? Do you have a strong penalty abatement case? Call us at 1-888-282-4697.  Staff of Washington Tax Services.

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