Writing an IRS Penalty Abatement Request Letter (with Sample)
Use this sample IRS penalty abatement request letter as a template for your successful appeal letter.
Last updated on June 27th, 2022
There are several reasons a person may be charged penalties related to their income tax. The Internal Revenue Service (IRS) is responsible for charging these penalties for federal income tax returns. There are other agencies that charge penalties for state and local issues. If the taxpayer has a valid reason, these penalties may be appealed with a tax return penalty appeal letter.
Federal Penalties
Federal penalties may involve money or the forfeiture of property. If there are criminal penalties, it may mean jail time for the person, but this can only be imposed by a federal judge after the person is convicted. Monetary penalties are usually based on the amount of tax that wasn’t paid.
Time is also a factor because if years of not paying taxes have gone by, the monetary amount may be higher. Most penalties are a fixed amount or a fixed percentage of the amount of tax owed. These penalties can be appealed and may be abated or waived if the taxpayer can show reasonable cause for their failure to pay.
Right to Appeal
Taxpayers have the right to appeal if the IRS sends them notification of adjustment to their tax return. However, if the correspondence was a bill with no mention of appeal or if the taxpayer simply can’t afford to pay the penalty then appeal is not for them.
Known as a penalty abatement request, there are four main categories for appeal:
Federal penalties may involve money or the forfeiture of property. If there are criminal penalties, it may mean jail time for the person, but this can only be imposed by a federal judge after the person is convicted. Monetary penalties are usually based on the amount of tax that wasn’t paid.
Time is also a factor because if years of not paying taxes have gone by, the monetary amount may be higher. Most penalties are a fixed amount or a fixed percentage of the amount of tax owed. These penalties can be appealed and may be abated or waived if the taxpayer can show reasonable cause for their failure to pay.
Right to Appeal
Taxpayers have the right to appeal if the IRS sends them notification of adjustment to their tax return. However, if the correspondence was a bill with no mention of appeal or if the taxpayer simply can’t afford to pay the penalty then appeal is not for them.
Known as a penalty abatement request, there are four main categories for appeal:
- Reasonable cause is judged on an individual basis and may result in a penalty abatement if the cause is proved valid
- Statutory exceptions are based on the Internal Revenue Code and may provide an exception for the taxpayer.
- Administrative waivers are caused because of delays created by the IRS and not the fault of the taxpayer.
- Correction of service error is based on an error of computing made by the IRS. When this is caught by the taxpayer, the penalty may be abated.
It is recommended by the IRS that taxpayers have the help of a professional when making a request for tax penalty abatement. The professional could be an attorney, a certified public accountant or someone enrolled as an agent that is authorized to practice before the IRS.
If the professional will speak on behalf of the taxpayer, the professional must show a signed power of attorney from the taxpayer. In any case, if the reason is valid, the taxpayer must plan his or her request carefully.
The following things should be considered before planning to appeal a penalty. If the taxpayer believes any of the following things, he or she must have the documents to prove it.
- The IRS misrepresented the law
- The IRS did not properly apply the law because of a misunderstanding
- The IRS is taking inappropriate collection action or it denied an offer of compromise
- The IRS used incorrect fact
Most people make a penalty appeal based on reasonable cause. This means things that were out of their control caused them to fail to file their income tax form.
Some reasonable causes are:
- Serious illness
- Natural disaster with damage to the home or person
- Fire that destroyed a person’s financial documents
- Bad advice from a tax adviser
- Death of an immediate family member
- Unforeseeable delays such as a postal strike
The letter from the IRS notifying the taxpayer of their fine should also contain instructions about how to appeal and what forms are necessary.
Below is a sample tax return penalty appeal letter. It should be written in formal business-letter style, sent by certified mail with a return notice requested and sent as a cover letter with the proper application forms.
Sample IRS Penalty Abatement Request Letter
Homeowner’s Name
Homeowner’s Address
City, State, Zip Code
DATE
To the Board of Review or Tax Board or Tribunal:
I am sending this letter as notice that I would like to appeal my property tax assessment. The details as to why my home is over assessed are given below.
1. There are three main discrepancies between the property record that was filed and what is actually in my home.
- I have a two car garage, not a three car garage as indicated. Tax value - $2,000
- I have 1,000 square feet of living space not 1,800 square feet as indicated – Tax value $7,000
- I do not have a wooden deck. Tax value - $1,500
Kindly deduct $10,500 from my assessment.
2. There is structural damage to my home that reduces its resale value.
- An exterior wall and the corresponding foundation are severely cracked, which is not mentioned in the assessment. Tax value - $5,000
- The roof leaks in the kitchen. Tax value - $3,000
Kindly deduct $8,000 from my assessment.
3. In comparison to two homes that have recently sold on my street, I am requesting a reevaluation of the value of my home. Both of these houses have similar square feet, age and upgrades.
- The house at ADDRESS sold for $250,000
- The house at ADDRESS sold for $225,000
Kindly change the assessment of my home to $250,000.
The information given in this letter clearly shows that my property taxes have been incorrectly assessed. The assessment shows improvements and upgrades that do not exist in my home.
Also, the value of my home should not be more than $250,000. I am requesting that my tax assessment be adjusted according to the provided information. I would be happy to meet you informally to discuss the situation or will submit a formal request. I can be reached at 555-123-4567 or at [email protected].
Sincerely,
Homeowner’s signature
Homeowner’s Name printed
List of enclosures
By Andre Bradley
Related Articles