If you owe money to the Internal Revenue Service (IRS), you are probably looking for any possible way to resolve the matter or reduce the amount that you owe. In some situations, you may be able to request a refund or abatement of your tax debt. This can be done by filing a Form 843.

This form can be used to request an abatement (an end or reduction) of certain types of taxes, fees, penalties, and interest. If you believe that you are entitled to an abatement, you will typically have to file a separate Form 843  for each type of tax or fee, and for each applicable tax year. 

A seasoned New Jersey IRS tax lawyer can help you with this process, working with you to identify possible taxes and fees that can be abated, and making sure that the forms are properly filed. Through Form 843 and other strategies, a tax attorney may be able to help you resolve your tax problems.

What Is IRS Form 843?

The IRS is notorious for assessing interest and penalties on taxpayers. There are more than 150 types of penalties that the IRS may impose. Most frequently, penalties are assessed for failure to file, failure to pay, failure to pay estimated taxes, and inaccurate taxes (after an audit or underreported inquiry).

There are many situations that may lead to a person incurring these penalties. For example, a taxpayer may suffer a serious illness or a death in the family, or lose their records in a flood. Alternatively, you may have penalties and interest imposed unjustly because the agent handling your case does not understand the facts or the law.

If the IRS has incorrectly assessed penalties, interest, and fees against you, or if you believe that you had good cause to not file or pay your taxes on time, you do not have to simply accept the penalty and interest. Instead, you can use Form 843 to request a refund or abatement.

IRS Form 843 can be used to reduce interest and tax penalties imposed on taxpayers by the IRS, and to request a refund of certain taxes.  It can be used to:

  • Request an abatement of tax that is owed, other than income tax, estate tax, or gift tax;
  • To request an abatement of a penalty that you owe when you have a reasonable cause  (such as being late paying your taxes due to medical issues) or another reason allowed by law;
  • To request a refund of taxes that were withheld by your employer in error, if your employer refuses to adjust the over-collection of taxes;
  • To request an abatement of interest, penalties, or other additions to the amount of taxes that you owe to the IRS if these amounts were caused by errors, delays, or incorrect written advice by the IRS; and
  • To request a refund of tax and interest penalties that you have already paid.

In each situation, you will be asking the IRS to either refund you money that you have already paid or removed a penalty or interest that has been imposed so that you no longer owe that amount. Form 843 is the most common way that a taxpayer can challenge IRS penalties, and can be made after you receive a notice from the IRS of a tax penalty.

There are four reasons why the IRS may offer relief from penalties and interest:

  1. Reasonable cause
  2. Statutory exceptions
  3. Administrative waivers
  4. Correction of IRS error

Most taxpayers request abatement due to reasonable cause (i.e., a good reason why they did not file or pay their taxes in a timely manner) or due to IRS error.

How Do I File IRS Form 843?

As soon as you discover that the IRS has assessed a penalty against you inappropriately, you should start the process of filing Form 843. Keep in mind that some types of abatement requests have a strict time limitation, particularly if you have received a Notice of Deficiency, so time is of the essence with these requests. 

Generally, Form 843 must be filed within 3 years from the date that you filed the original return or 2 years from the date that you paid a tax. If you fail to file the form within this time period, then you may not be entitled to a credit or refund.

To file the form, you will need to fill out the Claim for Refund and Request for Abatement. Under federal law, the IRS can abate penalties for any errors that the agency makes with respect to any tax return. Form 843, indicates the reasons why the penalty should be abated. You should also attach a copy of the notice of penalty, along with any documentation that you have to support your abatement request.

After filing Form 843 or sending a letter requesting an abatement for reasonable cause, the IRS typically will make a decision within three to four months. If the IRS denies the abatement request, you will likely receive IRS letter 854C. You will then have 60 days to request an appeal from the date of this determination.

By filing an appeal, an appeals officer will be able to look at the totality of your circumstances. This may lead to your abatement request being granted. If your appeal is denied, then your only remaining option is to pay the penalty and tax debt, and then file a request for a refund.

Do I Have to Pay the Penalty Before Requesting an Abatement?

No. If the IRS assesses a penalty against you, there are three options: (1) review the penalty before it is imposed; (2) request an abatement before paying the penalty; or (3) pay the penalty and file a claim for a refund. As an initial matter, you can request a review of the penalty with the employee who has proposed it, prior to it being imposed. 

If the IRS does not agree to not assess the penalty, then you have two additional choices. You can file Form 843 after the penalty has been imposed, without paying it, or you can pay the penalty, and then request a refund through Form 843. A skilled New Jersey IRS tax attorney can work with you to help you decide which option may be best for you.

What Is “Reasonable Cause” for Abatement?

Reasonable cause” to have a tax penalty abated is not defined under the Internal Revenue Code. However, IRS regulations provide that reasonable cause for an abatement exists if a taxpayer exercised ordinary business care and prudence and were unable to file a tax return or pay the tax within the specified time.

This could be due to a number of reasons, such as:

  • Illness
  • Family emergencies (such as divorce or death)
  • Destruction of your records
  • A natural disaster, such as a fire or hurricane
  • Erroneous written advice from the IRS
  • Improper advice from a tax professional

In other words, if there was a situation beyond your control that led you to file or pay your taxes late, then abatement may be granted.

When Will the IRS Abate Interest on a Tax Debt?

If you owe interest on taxes, then you may be able to have that amount abated in limited circumstances. Generally, this will only occur if you can demonstrate that the IRS itself caused the assessment of interest. Specifically, you will have to show that the IRS caused the delay that led to interest being imposed, or that the IRS made certain errors. However, if you are able to get a penalty abated, then the interest charged on that penalty will be reduced or removed.

Get Help from an Experienced IRS Tax Attorney

Dealing with the IRS can be difficult, at best. If you believe that a penalty, fee, or interest has been incorrectly assessed against you, our law firm can help you get your money back or the penalty removed. 

At Paladini Law, our legal team is highly experienced at handling all types of tax matters, from New Jersey state taxes to IRS audits and more. We will work collaboratively with you to help you find the best possible solution to your tax issues. To learn more or to schedule a consultation, contact us at 201-381-4472, or fill out our online contact form.