How to Get an IRS Civil Penalty Waived and Keep Your Small Business
Recently, we were able to get a $49,000 IRS civil penalty waived for one of our Connecticut business clients. If we failed to get this penalty waived, this business would have closed its doors.
In order for a CPA, Attorney, Enrolled Agent, or any other qualified individual to represent a client in front of the IRS, they need to have a properly completed Power of Attorney—Form 2848. This form must be accurately completed, signed, and dated by both the taxpayer and the representative.
The 10% civil penalty assessed was for failure to file W-2’s and Form W-3. Imagine…$49,000 for failure to file tax forms. Ouch!
There was no tax due with the W-2's. The tax had already been remitted. These forms were merely informational at this point. We got the penalty waived due to reasonable cause. The taxpayer had a lengthy history of filing all of their tax returns and paying all of their taxes timely. In this case, the bookkeeper left the company and failed to file these forms. We had the documentation to show that all reasonable steps were taken to file these forms once it was brought to the client’s attention. As one of my attorney friends once told me, "There is nothing like a good set of facts to support your case."
It took over ten months to get this penalty waived. There were numerous phone calls, letters, and faxes. Ultimately, it was worth it, but you do need to be patient and persistent. During this process, request that a hold be placed on the account. Therefore, no collection activities will be taken during this time. We were effective in getting a 30-day hold placed on the account. This allowed us time to submit more information and for the IRS to process it. All of this hard work resulted in the penalty being waived, the business being able to continue, and one very happy client.
ACTION ITEM: Taxpayers should remain diligent and file tax returns and pay taxes timely. If something falls through the cracks and tax forms are not filed on time, address this situation as soon as possible to get it resolved.
Thomas F. Scanlon, CPA, CFP®