Essential Documents for Individual Penalty Abatement
Penalty abatement is a great way to help reduce your client’s tax debt. Here’s how you can request a
penalty abatement from the IRS.
Let’s say you’ve determined that your client is eligible for a penalty abatement to help reduce their tax
debt.
How do you go about actually requesting a penalty abatement from the IRS?
Luckily, it’s not complicated and you have several options. Let’s take a look at exactly how you can
request a penalty abatement on behalf of your clients.
Step 1. Obtain a Power of Attorney
Any time you contact the IRS on behalf of a client, you will need to have a power of attorney on file with
that client. Make sure to file the power of attorney form (Form 2848) in advance as it generally takes the
IRS five to seven days to process.
Step 2. Choose: Phone or Letter
The method you choose will depend largely on the circumstances of your client and the nature of the
penalty you are trying to abate. For some simple penalties—such as a First Time Penalty Abatement—a
phone call to the IRS is almost always sufficient to get the penalty abated (and much faster than waiting
for the IRS to process a letter). For more complex issues—such as requesting an abatement due to
reasonable cause—a letter is the better option to clearly lay out an argument and provide supporting
documents.
Step 3. Write the Letter
If you choose to write a letter to request penalty abatement for your client, there are a few things you’ll
want to keep in mind:
- Write the letter in standard business format. This letter is a formal request so treat it
accordingly. - Reference the specifics. Make sure the IRS knows exactly what you’re talking about by clearly
stating vital details such as who you are representing and the type of notice you are responding
to. - Lay out your case. You’ve already determined that your client is eligible for penalty abatement,
this is where you explain your reasoning. Be detailed and explicit. This is a great place to make
use of bullet points. Also, be sure to reference official IRS documents such as the IRM to support your reasoning. - Ask for what you want. After you’ve laid out your argument, don’t forget to ask for what you
want. Be clear and specific, including the dollar amount you are requesting to be abated.
Step 4. Include Supporting Documents
You can ignore this step if you’re requesting the abatement over the phone. However, when you use a
letter to request penalty abatement, you need to include supporting documents. You want to do your
best to provide the IRS with everything they will need to make their decision. Quick pro tip: never send
original documents to the IRS. Always send copies. The risk of the IRS losing your originals is just too
high.
Supporting documents that need to be sent to the IRS along with your abatement request should
include:
- Proof of power of attorney
- A copy of the original notice sent to the taxpayer by the IRS
- Any documents that support the case made in your abatement request letter, such as bank
statements or medical records
