IRS & New York Tax Penalty Abatement Attorney

Penalty abatement is a formal request to remove or reduce penalties. There are three ways to have your IRS penalties removed or reduced: first-time abatement penalty, reasonable cause, or statutory exceptions. Penalty abatement can be used for IRS and NYS DTF penalties. 

Eliminating your penalties can significantly lower your tax bill, especially if the penalties that have accrued make up a significant part of the tax bill. However, if you’re applying for reasonable cause, you have to be very thorough with your explanation to prove eligibility, and working with an experienced professional is key. 

If you need penalty relief, Stephen B. Kass can help. He is a tax attorney and a CPA, with over 30 years of experience in tax resolution. 

You’re in the Right Place If

Our penalty relief services help individual and business taxpayers in these situations and others:

• You failed to file a tax return or pay your taxes, and you have a clean compliance record.
• You failed to comply with tax laws, but you have a reasonable cause.
• Most of your tax debt is a result of penalties (failure-to-file, failure-to-pay, accuracy-related, or payroll deposit penalties)
• The IRS has already sent you a CP14/CP501 balance-due notice.
• You’re dealing with an audit that added penalties to your tax bill.

What Is Penalty Abatement?

Penalty abatement is the process of asking the IRS or state government to reduce or erase penalties added to your tax bill for filing your return late, paying your tax late, or making an accuracy error. 

The IRS and NYS can remove the penalties as long as you meet the legal criteria. Removing a penalty also removes the interest accrued on that penalty (interest on the underlying tax remains), further lowering the tax bill. 

Abatement can apply before payment, reducing the balance, or after payment, generating a refund.

Here are the two main types of penalty relief:

First-Time Penalty Abatement

This administrative waiver applies if you haven’t incurred any penalties and have maintained an otherwise good tax compliance history over the last three years. This means you have filed all returns and are current on all payments if you have a payment plan. 

First-time abatement usually only applies to failure-to-file, failure-to-pay, and failure-to-deposit penalties. Note that you should apply for abatement in the year when it would save you the most – don’t waste it on a smaller penalty. However, the IRS is introducing Automatic Exemption from Penalty (AEP), where it will automatically approve your penalty relief if you qualify for the FTA. 

Reasonable Cause

In federal tax law, reasonable cause penalty abatement is an administrative and statutory defense that allows the IRS to remove tax penalties if you failed to meet your tax obligations due to an unavoidable hardship rather than willful neglect. 

To qualify for this penalty relief, you must prove that you did everything within your ability to stay compliant but failed due to circumstances beyond your control. Examples of what the IRS considers reasonable cause include:

• Death of an immediate family member
• Fires, natural disasters, or civil disturbances 
• Inability to access records
• Serious illness 
• System problems that delayed a timely electronic filing or payment

To get approval for reasonable cause penalty relief, you need to write an extensive explanation and share supportive documents to verify your narrative. Unfortunately, many requests are rejected even when there’s reasonable cause due to vague explanations or insufficient evidence.

This is why it’s critical to consult with an experienced tax attorney. At the Law Offices of Stephen B. Kass, we know exactly which narratives convince the IRS and New York State to remove penalties. 

Penalties That Can Be Removed

Not all penalties can be abated. Here are common penalties that can be removed or reduced:

• Failure to file: Applies when you don’t file your tax return by the due date. The penalty is 5% of the tax due for each month, or part of a month, the return is late. It accrues up to 25%.
• Failure to pay: Applies when you don’t pay the tax you owe by the due date. The penalty is 0.5% for each month or part of the month the tax remains unpaid, and can accrue up to 25% of the unpaid taxes.
• Failure to deposit: Applies when you don’t pay employment taxes accurately and on time. The penalty is 2-15% of the tax due, depending on how long the tax remains unpaid.
• Accuracy-related penalties: Apply when you fail to claim all your income or claim deductions or credits of income tax that you don’t qualify for. The penalty is 20% of the underpaid tax amount.
• Underpayment of Estimated Tax by Individuals Penalty: This applies when you don’t pay enough estimated tax on your income or pay it late. The penalty is calculated based on the amount you underpaid, the period during which it was due and unpaid, and the published quarterly interest rates for underpayments. This penalty can only be abated through statutory exceptions.

Penalties for fraud, some cases of negligence, and others aren’t eligible for tax abatement. 

New York State Penalty Relief

The IRS isn’t the only entity issuing tax penalties. The New York State Department of Taxation and Finance (DTF) also issues penalties. It has similar standards for reasonable-cause abatement, including deaths in the family, natural disasters, medical emergencies, or DTF errors resulting in noncompliance. NY penalty issues are common in sales tax cases, including late filing and late payment. 

One of the best steps you can take to avoid late-filing penalties is to file your tax returns on time, even when you can’t pay. This prevents you from incurring the failure-to-file penalty and from the state creating its own estimated return based on industry averages.

How Stephen B. Kass Handles Penalty Abatement Cases

Tax penalties can be serious, and so addressing them deserves an intentional process. Here’s how Stephen B. Kass approaches abatement:

• Pull and analyze IRS transcripts: First, Stephen will review transcripts to understand your situation and tax history. It also helps to review the transcript for penalty abatement opportunities you may not be aware of.
• Confirm compliance status: The next step is to check if your compliance record meets the FTA requirements.
• Determine what penalty relief option to pursue: FTA if you meet the requirements, and reasonable cause if you have the facts to support it. And a multi-pronged approach when dealing with several years of penalties or penalties on the state and federal levels.
• Prepare the reasonable cause request: If you’re eligible for this relief, Stephen completes Form 843, including giving a factual explanation, with all timelines and supporting documents on why you should get penalty relief. 
• Communicate with the IRS or NYS: Stephen handles all communication, including negotiating with revenue officers and submitting requests with the NYS or IRS on your behalf throughout the process.
• Appeal denied requests: If your offer is rejected and he believes you have reasonable cause, he appeals with additional supporting documents to prove eligibility.

Every tax penalty situation is a little different, and we adapt this strategy to your needs. Our attorney carefully reviews your information and makes a recommendation for your best interests.

Penalty Abatement Within a Larger Resolution Strategy

Penalty abatement is just one piece of your tax puzzle. It rarely stands alone. Abatement can be used to reduce the balance, and then, we’ll help you resolve the remaining tax debt through an offer in compromise, installment agreement, or CNC status. If needed, we’ll also help you fight tax liens or appeal levies against your assets.

A smaller balance may change which resolution option is right for you or is realistic. Abatement is still available to many taxpayers, even late in a case, and even after an audit or tax court litigation.

When Should You Hire a Penalty Abatement Attorney?

You can often apply for penalty relief if you qualify for an FTA by simply calling the IRS – they’ll resolve it by the end of the call, and it doesn’t require any documentation.

However, if you’re applying for reasonable case relief or are dealing with complex penalties, you should hire an attorney to prepare your request, especially if: 

• Penalties are a significant portion of your total balance.
• Multiple years of penalties are on your transcripts.
• You have a genuine hardship story, but don’t know how to document it.
• A prior DIY abatement request was denied.
• Penalties were added during an audit or after catching up on unfiled returns.
• You don’t want to spend hours on hold with the IRS.

Why Choose the Law Offices of Stephen B. Kass

Here are reasons you should consider working with our law offices for your penalty relief request, whether it’s for the NYS or IRS:

• Great credentials: Stephen is a CPA and a tax attorney, dual credentials that most professionals can’t match. 
• Over 30 years of experience: He also has 31 years of experience, so he understands the best approac to take.
• Proven record: He has many years of experience handling large, complex cases, including clients who owe more than $100,000 or even over $1 million.
• Customized experience: Stephen treats each case individually and personalizes his approach for each client to ensure you achieve the best possible outcome. 
• Experience with NYS DTF: Extensive state-level experience ensures you get the help you need for all the tax penalties you owe, not just the IRS penalties.

Get Help Removing IRS and NY Tax Penalties

Penalties can increase your tax debt significantly, which is why penalty relief is one of the most underrated tax relief options. It helps lower the tax bill by eliminating penalties and the interest accrued on them. 

However, you need to present your “why” in detail, especially for a reasonable cause case. The IRS receives thousands of penalty relief requests. Therefore, if your explanation is vague and unsupported, it is likely to be rejected. 

Schedule an appointment online with Stephen or you can reach him by phone at 212-843-0050. Get help preparing a penalty relief request that’s designed for success. 

Frequently Asked Questions about Penalty Abatement