Penalty Abatement

[Mike Mac]

Can the group share their experience (or clients' experience) with companies that represent tax payers in an attempt to abate the penalties or taxes owed by an individual?

I have a client who had not filed taxes for the past seven years. We filed for all those years in 2007 and he recently got his letter from IRS that said with interest and penalties, he owed $18,000 (around $8,700 in taxes and $9,300 in interest and penalties). He had actually lost some small refunds that would have been due him if they would have timely filed for a couple of those years. He was self employed and the vast majority of the taxes were due to self-employment taxes to Social Security.

He contacted a firm that specializes in working with the IRS in the abatement of interest an penalties in these types of situations. Their fee is $3,900 and the only guarantee is that they will keep fighting for the abatement until they reach a final appeal.

My client is not sure what to do. I have no experience with these companies nor have I heard any evidence as to how succesful they are. My client really had no good reason for not filing all those years but last year decided it was "time to go staight". I am not an enrolled agent nor would have a desire to spend my time fighting the IRS on these things but I did tell my client I would ask this community for their experiences in order to help him make some type of decision on hiring the company.

Thanks.

[DaveO]

I have had a couple of clients use them.

They took $2,500 in fees and failed to either remove penalties or get the taxes compromised. One client did hire an attorney and recovered most of the money she paid. During the time we worked the OIC she would get solicitations in the mail weekly from other firms.

I think your client would be better served by contacting a local CPA or EA that has experience in this area and working with them.

[veritas]

Abatement of penalties

First of all there won't be an abatement of interest or taxes. This leaves penalties. There will be no abatement of form 2210 penalties. So what is left is late filing and late payment penalties.

So does it still pencil?

[oceanlovin'ea]

JKHarris

One of my clients asked about this company and I either asked about it on this board or QF board before this one was operative.

The response I got was that they charge a lot of money and don't get anything accomplished. Don't waste your money! was what I was told to tell my client.

Linda F

[DaveinTexas]

I had a client that used JK Harris

The firm with the big guy on T.V. that promises to settle with the IRS for "pennies on a dollar" and the same firm that is involved in a multi state lawsuit for making promises that were not kept.

Anywho, my client had JK file 5 years and was charged $5000. These were simple returns, two W2s, married couple with no children and no itemized deductions. No penalties were abated and the original amount the client owed from the filing stuck.

The IRS has since said that the use of settling for the phrase "pennies on the dollar" is not a good business practice.

I would say the client probably has a better chance of reasoning with the IRS to abate penalties than any high paid JK firm. I think the IRS would be more compassionate toward a taxpayer rather than a high paid suit.

That's just my opinion; you can either accept it or you can agree with me.

[JG EA]

Pennies on the dollar

100 of them that is.

[joanmcq]

First of all there won't be an abatement of interest or taxes. This leaves penalties. There will be no abatement of form 2210 penalties. So what is left is late filing and late payment penalties.

So does it still pencil?

I'm betting the penalties that MAY be abated are less than $3900. Tell them not to waste their money. Now if they have not been in trouble before (and I don't know if this will work since they were 7 years delinquent) if you write, or have them write a nice letter asking for penalty abatement and give a good reason for not filing (the bigger the tear jerker the better), you may fall in the 'one time abatement of penalties' bucket and get a waiver on what is abateable. It doesn't hurt to try, you can charge them a reasonable fee, (I would charge about $30-60) and it might work. If it does, you are a miracle worker in their eyes!

[thomtax]

if you write, or have them write a nice letter asking for penalty abatement and give a good reason for not filing (the bigger the tear jerker the better), you may fall in the 'one time abatement of penalties' bucket and get a waiver on what is abateable. It doesn't hurt to try, you can charge them a reasonable fee, (I would charge about $30-60) and it might work. If it does, you are a miracle worker in their eyes!

A couple of years ago I had a client that had four years to file. Of all things, his records were at another tax preparers office and it was nearly impossible to get them back. According to her, she was filing extensions so there was no need to worry. ( I know this to be true because I have gotten several other clients from her, all with the same story.) We went the sob story letter route. They refused any relief and said that it was because he had a past history of being late, which was probably true since this particular preparer never files anything on time, and he continued to use her for years.

Since he was self employed, he is on a payment plan with the IRS for over $10,000.

So good luck on the abatement.

[totb2007]

The firm with the big guy on T.V. that promises to settle with the IRS for "pennies on a dollar" and the same firm that is involved in a multi state lawsuit for making promises that were not kept.

*snip*

That's just my opinion; you can either accept it or you can agree with me.

LOL. That last bit is funny.

Is there nothing that can be done about these guys on T.V.? What about truth in advertising?

[appelman]

First strike penalty relief

Just a note to the effect that if your client has been a good boy or girl for the three prior years, someone at the Practitioner Priority Line will generally rebate late-payment or late-filing penalties on the spot. No excuses needed. I am still hoping it can be done through e-Services, though the agent I spoke to said it couldn't.

[Kram BergGold]

One time penalty relief

When you call the hotline to remove penalty using what I call "your one time get out of penalty card" you can only remove the penalty for one year. This is why when you do multiple years you file the one with the largest penalty first. Get that one removed and then bit ethe bullet on the rest.

[gboykin]

I just had penalties abated for 5 years worth of returns. We filed all returns and waited for the penalty letters. I included all letters and a cover letter asking for abatement of the penalties for all years included. We included a check for the total of penalties and interest. Received letter yesterday abating all penalties.

[DaveinTexas]

It Depends

Your chances of the IRS abating the penalties really depends on the circumstances, who at the IRS reads the letter, who is the manager on duty, if the manager on duty just got a raise, if the manager on duty just found out that his manager on duty is having an affair with his wife, blah, blah, blah!

Like other posters mention, the request for abatement may work with the first year but what about the following years? What's the excuse for being late 5-7 years in a row? Better be a good one.

I like the company that will "fight for an appeal" and then charge the client an additional $1,000 to walk them through the very complicated process that is the Installment Agreement. Laughable man!