Considerations

• If the taxpayer fails to file his 2010 income tax return by April 18, 2011, he will pay a 5 percent penalty on any owed tax for every month his return is outstanding per IRS Topic 653. In addition, the IRS will levy an additional penalty of 3 percent plus the federal short-term interest rate on any monies owed past the tax return due date. If the taxpayer filed his taxes on time, the maximum penalty she will pay is 25 percent of the total tax owed.
  
  

Reasonable Cause

• The IRS allows taxpayers to request a removal of all tax penalties if the taxpayer suffers from a civil disturbance, such as a riot, hurricane, tornado or wildfire, which prevents the taxpayer from paying his taxes on time. The IRS considers persons who do not file their taxes as having reasonable cause for penalty abatement if the taxpayer or her immediate family suffers serious injury, mental incapacity or death.
  
  

Bad Advice

• If a taxpayer wrote to the IRS and asked for advice on a particular tax issue and received erroneous advice from the agency, the IRS will remove tax penalties if the taxpayer fills out a Claim for Refund and Request for Abatement (Form 843). For a taxpayer to prove his case, she must provide a copy of the original request for tax advice, a copy of the advice the IRS sent to her and the notice showing the penalty charged.
  
  

Resolution

• For most penalties, the taxpayer can write to the address on his IRS penalty letter requesting that an agent reduce his penalty. Taxpayers should provide written documentation of their claim, such as providing a signed note from a doctor detailing the severity of their illness or providing the death records of a recently deceased family member. Individuals can also call the number listed on their penalty letter or meet with an IRS agent in person to resolve a penalty. After considering the evidence and determining reasonable cause, the IRS will then decide whether to remove the penalty.