S Corporation Late Filing Penalty Abatement

[aviator01]

A request for an extension to file for the client was inadvertently missed this past March. The return was filed in July and the Service assigned a penalty for the late filing (IRC Section 6699.) Insofar as I know the client has never been penalized in the past for issues related to his S Corporation and I would like to prepare and submit a request for an abatement of the penalty. While this penalty assignment for late filing is relatively new (having gone into effect in year 2010), has anyone had any experience with getting such petitions approved? I am hoping that the past good record of the client will provide relief in getting the abatement granted. I welcome any advice board members may offer.

Thank you.

Aviator

[ChEAr$]

With a proper POA from corporate client, write IRS a letter setting forth the facts: 1. the sterling quality of corporation's past filing record and 2. that corporation relied on outside service (you) for reasonable compliance. 3. and that it will never do it again.

IRS does seem to have tightened up a bit in recent years, so if that doesn't work, guess who needs to reimburse client?
(but if you have to, do it by reducing your fee for future work until it all evens out.)

[DaveinTexas]

One time abatement, sort of

The IRS recently installed a program for late filed S Corp returns. Obtain the POA from the client to avoid trouble on the phone with the agent. Call the IRS and kindly ask for penalty abatement based upon their record of past timely filed returns.

The agent then goes through the motions (as they are instructed to per the program) of checking the filing history of your client. If, usually, they have timely filed their returns in the past three years the agent will abate the penalty; it's that simple. Where it could go wrong is if your client has timely filed within the past 3 years but before that time they filed a late return, this could prevent the abatement.

If the penalty is beyond the limits of the agent on the phone, he/she may ask you to write a letter asking for abatement. If that is the case, prepare a letter request for abatement using the same tactics listed above.

Reliance upon a tax preparer to file the extension and/or return timely will not work anymore. The IRS states in their IRM:

4.10.6.3.5.3* (05-14-1999)
Reliance On Representative and/or Return Preparer

"Taxpayers often advise examiners that penalties are not applicable because they relied on a representative or return preparer. The representative or preparer is alleged to be the cause of the noncompliance.

These assertions should be documented and substantiated if possible.

Various regulations and court decisions have held that although a taxpayer may authorize a representative to prepare and file the tax return, this action does not relieve the client (taxpayer) of meeting their legal obligations as a taxpayer."

I also know this from recent events, late filed return, my fault, still working off the penalty. Even after I called the IRS, wrote two letters and even the client wrote a letter. The fault was shared by the client, because she has a lot of class and grace, and she conceded to share in half of the payment of the late file penalty. In my case she has filed timely for the past three years but back in 2002 she filed late (that was precedence in the agent's eyes).

You should be fine as long as the client has filed timely, always. It might be wise to search past filing transcripts to add some ammunition to your requests. Prove the client has always timely filed and your case should be open and shut.

Good luck and keep us posted.

[ChEAr$]

Learn something new every day. Didn't know about recent IRS one time grace.

But I did iknow about the reliance on a tax pro thing. Still though, it's possible to use it and get it past an IRS agent who doesn't know about it. Been there; done that.

[aviator01]

S Corporation Late Filing Penalty Abatement

Thank you, "ChEAr$" and "DaveinTexas" for your comments and advice. I am encouraged that if there are no problems that exist in the past of which I am unaware this issue may be favorably resolved for my client.

I will update you as the processing is completed.

Aviator

[aviator01]

For general information. My request to the IRS