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Penalty Abatements
The Internal Revenue Service imposes substantial penalties and interest on underpayments of tax. In some cases, the penalties and interest can be several times the amount of the original tax due. Through tenacious advocacy and informed procedural decision making, Frank Tax Law has successfully negotiated the abatement of penalties and interest for its clients.
In 1998, Congress liberalized the standard for the abatement of interest. Interest can now be abated for either "ministerial" or "managerial" delay. Prior to 1998, a taxpayer was required to prove that the IRS had failed to perform a ministerial act, a much more restrictive standard than "managerial" delay, in order for interest to be abated. Notwithstanding, Frank Tax Law has prevailed under the more challenging "ministerial" act standard, which has resulted in millions of dollars in savings for our clients.
In many cases, interest accrues to disproportionate amounts due to an error or delay by the IRS. If, for example, your tax case was assigned to an IRS employee who neglected or failed to finally resolve an audit or appeal, there are grounds for abatement of interest.
The IRS imposes a wide range of penalties against individual and business taxpayers. As an example, a penalty of 25% of the tax due is imposed for a return that is filed only five months late. Similarly, there is a 25% penalty for not paying a tax liability within five years of its assessment. Some of the harshest penalties are imposed against business taxpayers that are required to make federal tax deposits and fail to do so on a timely basis.
The IRS uses a "reasonable cause" test to determine if penalties should be abated. Over the years, penalties have been abated for medical reasons, ignorance of the tax laws, fire, flood, spousal problems, drug dependency, alcohol abuse, and for erroneous tax advice received from an attorney, CPA, or the IRS.
As with most administrative matters involving the IRS, the key to success is presenting a claim for the abatement of penalties and interest properly and, moreover, finding the right forum within the agency. It has been our experience that many taxpayers have filed or paid late through no fault of their own. Even so, it can be extremely difficult to find a sympathetic ear at the IRS. At Frank Tax Law, we can help you find relief either before the agency or, in some cases, before the United States Tax Court.
