First Time Abatement

[SULTANSHAKUR]

Our client started their LLC in 2014 and started operations in 2015. They elected to file their taxes as an S Corporation. They didn't file any payroll taxes for 2015 and 2016. They came to our office in 2017 and have now paid all their back payroll taxes including penalties. We want to request IRS to refund them the payroll tax penalties incurred in 2015 and 2016 on the basis of First Time Abatement since they were new, first time business owners.

Are there any tips on how to form the request letter to IRS and what to write in it to increase the chances of IRS refunding the penalties? Has anyone had any experience with this?

[MDEA]

First Time Abtement

You can only receive first time abatement for one year.Than it is no longer first time.

[Gretel]

Reasonable Cause

I would first try to just use reasonable cause as reason for abatement request. Make sure to use these words in the request and maybe they got wrong advise from someone, maybe an attorney? That also needs to go in the letter. Three things can happen:

1. IRS agrees
2. IRS doesn't agree at all
3. IRS doesn't agree but automatically abates penalties for one year using the First Time Abatement - I had this happen.

In case 2, I then would ask for the First Time Abatement, choosing the year with the highest penalty.