Reducing IRS Debt Penalties

Last updated on May 30, 2022

Taxpayers who are under tax debt often look for ways to reduce their back taxes through an IRS program. Although there are IRS debt payment plans, such as an Offer in Compromise and the Currently Not Collectible program that allow taxpayers to pay a reduced amount of their tax debt, these payment plans have strict qualifying factors that many taxpayers cannot clear. Therefore, a reduction in penalty is an option that taxpayers can explore when planning to pay back their IRS debt.

IRS Debt Reduction: Penalty Abatement

The IRS charges a penalty for non-filing and failure to pay to ensure compliance. The IRS may charge a penalty for incorrectly filed tax returns, delays in filing, and the non-payment of taxes. A reduction in IRS penalties provides relief to taxpayers who cannot get their tax debt amount reduced through payment plans.

Taxpayers may use IRS Form 843 to apply for Penalty Abatement, but before applying taxpayers must consider their eligibility. Although it’s at the discretion of the IRS to approve a request for penalty abatement or not, taxpayers may improve their chances of qualifying for penalty abatement by knowing the various factors the IRS considers.

IRS Debt Reduction: Factors to Consider for Penalty Abatement

When reviewing a request for abatement of penalty, the factors the IRS considers include:

• Serious illness
• Death in the family
• Natural disasters
• Damage or destruction of tax records
• Bad financial advice
• Divorce
• Extended unemployment

The reason for requesting an abatement of penalties can help taxpayers reduce their total tax debt amount. There is no fixed criteria the IRS accepts. As most taxpayers use the help of a tax lawyer to resolve their tax debt, a tax professional considers various options and negotiates with the IRS to achieve the best resolution in favour of the taxpayer.

IRS Debt Resolution Help

The IRS may forgive a part or all of the penalties charged on a tax debt. However, it depends on the particulars of the case, the preparation of the case, and the negotiation skills of the legal representative of the taxpayer. A reduction in penalties can substantially reduce the total IRS debt amount.