You already know the mistakes taxpayers make with criminal charges. There are things you can do to improve your chances of getting approval: According to TIGTA, for the 2010 tax year, the average reduction in non-subject individuals who were eligible under the FTA was $240 and the average reduction in non-payments was $84. However, more than 90% of those eligible for a free trade agreement did not receive the 2010 waiver.7 This is likely due to the fact that taxpayers did not know they could apply for it. The IRS does not publish FTAs as a relief option on its fine notices or on its website. 8 The IRS officially declares that the sanctions are intended to promote a system of voluntary compliance with the tax code, not to generate additional revenue for the government. So, when writing a mitigation letter, we recommend that you highlight the facts that show you are innocent and highlight the steps you need to take to voluntarily comply with tax laws. If you made a mistake, explain why the error or oversight occurred. Your letter must clearly state the reasonable reason for the non-compliance and must not be vague or misleading. This guide will help you clarify all your questions and provide you with all the information you need to know about tax reduction letters.
Example: C filed late tax returns with a balance due for 2010 to 2012. As a result, the IRS assessed the penalties for non-filing and non-payment of C for all years. She also received an estimated tax penalty for all years for not paying enough estimated taxes and withholding tax. These were the first instances of non-compliance on the part of the taxpayer. C`s tax expert notes that it has an argument in favour of a reasonable reason for 2012, based on its facts and circumstances and the application of criteria for a reasonable reason. The tax advisor obtains a free trade agreement for the 2010 non-submission and non-payment penalties and applies for a reduction of penalties for reasonable cause for 2012. Estimated tax penalties cannot be mitigated with the free waiver. Your completed letter must contain your signature and a certificate of accuracy of the letter. Also, don`t forget to include a list of the appendices you want to check with the application. 20 See point 20.1.1.3.1 (25.11.11) of the IRM on oral requests for a reduction of the fine. A penalty reduction letter informs the IRS that you want the penalty removed for a reasonable reason.
This letter documents the cause, explains your particular situation, and is often the right course of action in situations where you have made an effort to comply with legal requirements but have not been able to meet your tax liability due to circumstances beyond your control. It is advisable not to pay the penalty before requesting a discount. You may be able to request a due process hearing if you have an outstanding balance, and the IRS can use this opportunity to review the request for reduced sentence at that hearing. In 2001, the IRS entered into a free trade agreement to consistently and fairly manage penalty reduction, reward past compliance, and promote future compliance. This exemption from administrative penalties allows a non-compliant taxpayer for the first time to request a reduction in certain penalties for a single tax period – a tax year for income tax for individuals and businesses and a quarter for payroll taxes. The report notes that Form 843, Entitlement to Refund, can be used for penalty reduction, but is not designed for penalty reduction because it does not guide the taxpayer to meet mitigation requirements. IRSAC notes that the instructions in Form 843 on mitigation are “confusing at best.” The form is also not designed for unpaid penalties. Even the name of the form implies that it should be used for claims for reimbursement after payment, and not for requests for non-notification or mitigation before paying a penalty. 35 The instructions on Form 843 were amended in December 2012, but not in order to take better account of any arguments relating to the reduction of penalties and to simplify requests for reduction. Another way to strengthen your case is to show how you have always been compliant in filing and paying your taxes in the past.
For example, you may have suffered a small penalty in the past, so address this in your letter and explain what happened in those circumstances. If you don`t omit this information, it may seem bad for the IRS. I am writing to request a reduction of [enter a specific penalty] of the amount of [enter the amount] as estimated in the attached notice of [month/day/year] 1) Compliant with the returns – [I/We] have filed all required tax returns or extensions and have no outstanding tax claim or reduction 2) 3-year clean penalty history – [I/We] have not set tax penalties for the 3 years Previous [Note: However, you may have an estimated tax penalty as allowed] 3) Compliant with payments: [I/We] have paid all my taxes due or set up a remittance agreement that I am currently using on reasonable grounds, instead of accepting an oral request, the IRS may require taxpayers to file documents in support of their claim. The IRS representative can accept “credible information” orally or in writing. The IRS Automated Causes Wizard (see below) prompts the representative to request documents. 22 If the customer`s penalties exceed the threshold, the waiver still applies, but IRS procedures require that the FTA request be made in writing. 23 In practice, when it requests a reduction in penalties of several thousand dollars, it is prepared to apply in writing for a free trade agreement. 24 The contractual penalty will continue to accrue until the tax is paid in full. It may be to your advantage to wait until you have paid the tax due in full before claiming penalty relief under the service`s initial penalty reduction policy. It`s no surprise that those writing a mitigation letter for the first time are worried about what to record. This process is not as complicated as you might think. There are seven essential sections: Also be sure to include an explanation of previous requests for a reduction of sentence in this part of the letter.
It is important to introduce a tax penalty case so that the IRS agent can easily track what happened, why a penalty was claimed, and what steps, if any, were taken to resolve or mitigate the problem(s). Each factual template may require a different style of organization, but in general, a penalty reduction letter should include the following sections: Here are examples of letters to request a reduction irs.. .
