Penalty Abatement Criteria 

IRS has general guidelines that may be considered where penalties are not charged or are to be abated after assessment because of reasonable cause.

• Death or serious illness of the taxpayer or a member of his or her family.

• Unavoidable absence of the taxpayer.

• Destruction by fire or other casualty of the taxpayer's residence, place of business or records.

• You are unable to obtain records necessary to determine the amount of tax due for reasons beyond his or her control.

• You mailed your return in time to reach the appropriate IRS office but, due to no fault of yours, it was not received timely.

•  You did not file your return or pay the tax after receiving erroneous information from an IRS employee or competent tax advisor.

•  Any other explanation that establishes that you exercised ordinary business care and prudence but was, nevertheless, unable to comply within the prescribed time.

• For a corporation, these guidelines apply to the individuals within the corporation who have authority for attending to tax obligations. 

• Events that occur after the last date prescribed for payment (normally the tax return due date) are not relevant in making a determination that reasonable cause for waiving the penalties exists.

• Lack of funds or generally poor business conditions are not acceptable reasons for failure to make timely payment of taxes, especially withholding taxes collected from others.  You must be able to demonstrate that no funds were available to pay the tax due despite your best efforts.

• The penalty for failure to make estimated tax payments is mandatory and can not, except in very limited circumstances, be waived because of reasonable cause. It may be reduced or eliminated if you meet one or more of the exceptions that are available.   

• The penalty for late deposit of employment taxes is based on when deposits are due and when they are paid.  IRS may not apply deposits in your best interest so a change in how the deposits are allocated can result in a greatly reduce penalty. 

• Interest can be waived only if the IRS has failed in performing a routine task that does not involve the exercise of judgment.  This rarely happens.