Success in eliminating penalties?

[ajp]

I am wondering if anyone has had luck arguing for removal of a failure to file penalty?  The penalty sounds cut/dry but the pandemic did create an odd situation for a client of mine.  I have a draft of an argument written and can include an obituary as support.  I am wondering if I should have my client send in a check to cover the penalty while we wait for an answer, or if that is an admission of accepting the penalty?

Thank you, 

Amy

[sewcpa · Accepted solution]

IRS is likely to waive the late filing penalty but keep the late paying penalty. But it does not hurt to ask for all penalties to be forgiven. Taxpayer(s) needs to sign the request.

I would NOT send the money on the penalty - I have always felt that IRS was less likely to waive if they had the money in their hands. But have taxpayer pay the tax (labeled as "paying the tax 1st").

Details like the obit help.

[IRonMaN]

Once the IRS gets the cash, they ain't going to send it back.  If you want to try to avoid the penalties, definitely don't mail it in.  Just out of curiosity, what kind of excuse do you have?  Maybe we can all vote to see if we think it will be a winner 😀

[ajp]

Here's the excuse:

Client's former CPA filed an extension, then in September he got the partnership return done.  Between 9/15/21 and 10/15/21 the CPA got a bad version of Covid, was admitted to the hospital and died in November.  The CPA was sole prop. and my client didn't get his documents back until after the 15th.  He did send in a hefty payment at that time, hoping that it would be enough.  I filed the return for him that December, and the final payment was made.  It was filed on paper because the electronic filing system was down for annual maintenance.  

The saga did continue because I think the CPA was ill when the partnership return was done --- some very serious errors were made.  We filed an amended return for both the partnership and the personal return at the beginning of the year.  This actually reduced the tax liability of my client.  The IRS send a notice of never filing the return at all (yay, they lost it) so we responded to that one last month.  Now, we get to respond to the penalties.  He knows he will be paying the interest, but that is minor.  

🙂 UGH!

[IRonMaN]

Ok, you convinced me.  I am waiving the late filing penalty.  Oops, I forgot that I don't work for the IRS.  I think you have a reasonably good chance of getting some penalty relief.  But you never can tell who is going to be judge, jury, and executioner at the IRS.  If they are having a bad day, it could be a problem.  But then again you could get an IRS dude or dudess that just found out they won the lottery and is giving reprieves to all of the condemned taxpayers they are reviewing that day.