Tax Penalty Abatement: Use Proper Form on the Proper Forms

When it comes to IRS tax debt, the penalties can be brutal: 25% of the total tax owed, or more. In certain situations, and provided you (or your tax debt relief professional) use the correct forms for the correct situations, tax penalty abatement is possible. Here is a look at the two major forms used to apply for tax penalty abatement, as well as a reminder to think about why you might deserve tax debt relief:

Form 1040X: Rethinking Your Tax Debt

This is called an amended return. This form is great for clarifying misunderstandings or making changes that reduce your tax debt. For example, if you forgot to include a 1099 income from some independent contractor work and the IRS included that income for you, resulting in a large tax debt with a large penalty added on top, prepare a 1040X to include this income but also the deductions related to it. This should result in a lower IRS tax debt, and thus a lower tax penalty.

Form 843: Correcting a Tax Debt Mistake

This form is to be used when applying for tax penalty abatement except in the case of income tax. For instance, you can use this form in the case of:

• A refund or abatement of a penalty or addition to tax due to reasonable cause or other reason (other than erroneous advice) allowed under the law.
• A refund of excess social security or railroad retirement (RRTA) tax withheld by any one employer, but only if the employer will not adjust the over-collection.
• A refund of employment taxes when you reported and paid more federal income tax on your employment tax return than you actually withheld from an employee.

Working with a Tax Debt Professional

If reading the above paragraphs makes your head hurt, but you still want and think you deserve tax penalty abatement, consider working with a tax debt relief professional. Tax penalty abatement can be a complex issue.

Sometimes, a tax debt relief specialist will agree to be paid on contingency, meaning that they get paid when you get paid. Or, in the case of tax penalty abatement, they get paid when you don't pay the penalty, or pay less of it.

A Good Reason

If you request help with your tax penalty for a good reason, and you work with a competent tax debt relief professional, tax penalty abatement can absolutely be attained. But realize up front that a good reason is a big part of that equation.

Source:
IRS.gov

About the Author:
Andrew Freiburghouse is a freelance writer and editor living in Brooklyn, NY. He has worked in a variety of fields including magazine journalism, tax preparation, screenwriting, copywriting, and real estate. He graduated from Santa Clara University in 1999 with a B.A. in English. A regular contributor at tech blog Edgelings.com, Andrew was born and raised in the City of Los Angeles. He hopes he will survive the New York winter.