Waiver Letter

[Christian]

I have got to write a letter for a friend requesting waiver of penalties and interest for an error he made on his 2018 tax return. His tax record is clear for the proceeding three  years and beyond. I've not found it necessary to write one of these in ages. Do I merely state he is requesting a one time waiver of interest and penalties or do I need to provide some code section or other? Any help is appreciated. I have told him it very well may not succeed so he is not expecting a miracle. Also, if he sends his check paying the additional tax and penalties will they refund them ? 

[jklcpa]

https://www.aicpa.org/interestareas/tax/resources/irsprocedureadministration/irspenaltyabatement.html

Be sure to scroll past the ads to the bottom.

[Max W]

Can the error be corrected by amending the return?

If the filing deadline was missed and there are late filing penalties, a First Time Abatement can be requested by calling PPS.  Yes! it can be handled by phone.  

[jklcpa]

1 hour ago, Max W said:

Yes! it can be handled by phone.

 

The link I provided includes that procedure in detail and all of the required information to request the first time penalty abatement, either in writing or by telephone. There is also information about when, why, and how to follow up or document the conversation if handling by phone.

Since many don't click links, I've provided all of the information in the next post.

Edited December 13, 2019 by jklcpa

[jklcpa]

For those that don't click the links:

Quote

IRS First-Time Penalty Abatement

Overview

The first-time penalty abatement (FTA) waiver is an administrative waiver that the IRS may grant to relieve taxpayers from failure-to-file, failure-to-pay and failure-to-deposit penalties if certain criteria are met. The policy behind this procedure is to reward taxpayers for having a clean compliance history; everyone is entitled to one mistake.

Individuals and businesses may request FTA for any failure-to-file, failure-to-pay or failure-to-deposit penalty. FTA does not apply to other types of penalties such as the accuracy-related penalty, returns with an event-based filing requirement like Forms 706 or 709 and information reporting that is dependent upon other various filings.

Additional Guidance

Refer to IRM 20.1.1.3.6, Reasonable Cause Assistant (RCA), and IRM 20.1.1.3.3.2.1, First Time Abate (FTA).

To qualify for the FTA waiver, a taxpayer must meet the following criteria:  

• Filing compliance: Must have filed (or filed a valid extension for) all required returns and can’t have an outstanding request for a return from the IRS.
• Payment compliance: Must have paid or arranged to pay all tax due (can be in an installment agreement if the payments are current).
• Clean penalty history: Has no prior penalties (except a possible estimated tax penalty) for the preceding three years.

Note that per IRM 20.1.1.3, Criteria for relief from penalties, penalty relief under administrative waivers, which includes FTA, is to be considered and applied before reasonable cause.
 

Request penalty abatement by phone

A tax practitioner may call the IRS Practitioner Priority Service (PPS) line at 866.860.4259 to request FTA if his or her client’s case isn’t being handled by a specific compliance unit (examination, collection, etc.).

If the case is being managed by a specific unit, the practitioner should call that unit to request FTA.

A tax practitioner will need power of attorney authorization to request penalty abatement for a client over the phone (Form 2848, Power of Attorney and Declaration of Representative). The IRS personnel who takes the call should be able to pull up the client’s account, determine if the FTA criteria are met and apply the waiver during the call. The taxpayer would later receive a letter in the mail indicating that the penalties were removed based on FTA criteria. If the taxpayer doesn't receive the letter within 30 days from the date of the call, it is advisable to follow up with the IRS.

Tip: Calling the IRS is often the preferred approach to request FTA as often penalties can be removed quickly during the phone call. However, at times the penalty amount may be too high for the IRS to abate over the phone. If so, the tax practitioner should write a letter to the IRS to request FTA. Additionally, if the IRS abates penalties over the phone, it is advisable to write a letter to the IRS to confirm the conversation (include the date of the call, the agent's name and the agent's identification number).

Request penalty abatement by mail/letter

Instead of calling the IRS, a tax practitioner may write to the IRS to request FTA on behalf of his or her client. Include all relevant information in the request (taxpayer name, identification number, tax year/period, tax form and penalty type and amount). Clearly state that the client meets the FTA criteria. Consider attaching client transcripts that prove filing/payment compliance and a clean penalty history as well as a valid power of attorney (Form 2848). Be sure to include page numbers and the taxpayer’s name and the last four digits of their identification number on all pages sent to the IRS.

Other considerations

FTA only applies to one tax year/period. If a request for penalty relief is being considered for two or more tax years/periods and the earliest tax year/period meets FTA criteria, penalty relief based on FTA only applies to the earliest tax year/period. Penalty relief for all subsequent tax years/periods will be based on other relief provisions, such as reasonable cause criteria.

If the IRS hasn’t assessed the penalty, for example, a client is filing a return late and failure-to-file and failure-to-pay penalties will apply, the taxpayer may attach a penalty nonassertion request to the late-filed return.

If a client has already paid the penalty, he or she may file Form 843, Claim for Refund and Request for Abatement, to request a refund.

If the IRS doesn't grant penalty relief, consider taking the case to Appeals. Appeals may make a different decision based on other factors, such as hazards of litigation.

Each case is very different, but if the CPA (client advocate) doesn't ask for abatement, he or she can't get relief for the client. Clients can save thousands of dollars on penalties (often with a simple phone call or letter to the IRS) and rely on their CPA to advocate for them.

 

Reviewed Aug. 27, 2019

 

[Christian]

Kudos to our forum moderator who always comes through with such superb answers. His problem is he claimed credits to which he was not entitled. They have disallowed all of them and sent him a bill for additional tax with penalties and interest. The way I read this he is in a few words " up the creek with no paddle".