Sander & Associates, P.A.

The tax law provides for so many penalties, the IRS had to write an entire chapter of the Internal Revenue Manual – a "Penalty Handbook" - to tell its employees how to administer them. What most people don't know is that virtually all of the dozens of penalties that might be assessed against an individual or a business can be abated if the taxpayer has "reasonable cause" for the action, or failure to act, that gave rise to the penalty.

Reasonable cause for late filing of a tax return can include disability or death (of the taxpayer or a close family member); records unavailable due to fire, flood, tornado, or even a divorce dispute; bad advice from an IRS employee; no prior experience with the particular filing requirement; and reliance on the services of a tax professional that missed the deadline. Several years ago, a taxpayer in California was found to be disabled by alcoholism--he was too drunk to sign and mail his return--and therefore not subject to penalty for late filing!

Reasonable cause for late payment of a tax liability also includes death or disability, fire, flood, or tornado, and may even be granted when the taxpayer is suffering temporary financial hardship. According to Treasury Regulations, some collection efforts must be suspended if collection action would cause financial hardship. A manufacturing company in New Jersey was relieved of penalties for late payment of its payroll tax liabilities because the money needed to pay them was due from the United States Defense Department and was withheld during an FBI investigation of government purchasing agents.

There is even a special appeal process for taxpayers seeking abatement of penalties. It's called a Collection Due Process Hearing, and its purpose is to assure that your explanation of special circumstances receives fair consideration by the IRS.

It's important to respond to IRS penalty notices quickly, and to know exactly what the Internal Revenue Manual tells IRS employees to look for in abatement requests. We have studied the tax law that imposes penalties and offers abatement in special circumstances. We have experience helping individuals and businesses obtain relief from penalties when those special circumstances apply. We also have access to the IRS "Penalty Handbook," so we know the IRS standards for granting abatement of penalties. If you have been assessed a penalty and believe you have reasonable cause for the act being penalized, we can help you present your abatement request or your request for a hearing. Just call for an appointment, but remember -- prompt action is a must. Delay can cause an otherwise strong relief claim to be denied.