by Jay Freeborne , Enrolled Agent
March 9, 2013

This week we got the IRS to abate and refund about $15,000 in penalties (and interest which accrued on the penalties) for a customer. 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 put 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 should expect 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 or email us a description and we'll contact you.

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