PENALTIES & ABATEMENT
Penalties are assessed by formula and abated by argument. The formula is automatic; the argument is not, and it is not made for you.
Penalties are automatic. Relief is not.
They are assessed by formula and removed by argument, and no one makes that argument unless you do.
Scheduling does not create an attorney-client relationship. No such relationship exists until the firm has run a conflicts check and both sides have signed a written engagement agreement.
THE PENALTIES THAT MATTER MOST
Accuracy-related penalty, section 6662
twenty percent of the underpayment, rising to forty percent in defined circumstances. Defended on substantial authority, adequate disclosure with a reasonable basis, or reasonable cause.
Failure to file and failure to pay, section 6651
the failure-to-file penalty accrues at five times the rate of the failure-to-pay penalty, which is why filing without paying is nearly always better than not filing.
Trust fund recovery penalty, section 6672
assessed personally against individuals responsible for unpaid employment taxes. It pierces the entity, and it is not dischargeable in bankruptcy.
Information return and foreign reporting penalties
assessed per form, per year, and frequently larger than the tax.
REASONABLE CAUSE
The principal defense is reasonable cause under section 6664(c). Where the taxpayer relied on professional advice, the governing test asks whether the adviser was a competent professional with sufficient expertise to justify reliance, whether the taxpayer provided necessary and accurate information, and whether the taxpayer actually relied in good faith. Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43 (2000), affirmed 299 F.3d 221 (3d Cir. 2002).
Reliance is not established by having engaged someone. It is established by evidence, and the evidence is assembled.
FIRST-TIME ABATEMENT
Administrative relief is available for a first failure within a clean compliance history. It is granted routinely, and it is granted only if it is requested. It is also worth preserving rather than spending on the smallest year in a multi-year exposure.
Penalties are assessed by formula and abated by argument. The argument is not made for you.
HOW AN ENGAGEMENT BEGINS
Book a free consultation
Thirty minutes, no charge. Bring the notice — we read it together on that call.
The deadline is identified
Which notice it is, what it asserts, and which forums are still open behind it.
Conflicts check and written engagement
Scope and fee agreed in writing before any work begins.
HOW A CONTROVERSY RESOLVES
The firm takes over
Correspondence with the Service runs through the firm. You stop answering.
The position is built and pressed
Records, authority, and the argument — pressed at the earliest stage that will take it, because that is the cheapest place to win.
Resolution
Closed at examination, settled at Appeals on the hazards, or tried. The firm does not hand the file to anyone to reach the last of those.
Penalty exposure is assessed at the outset, not after the adjustment lands. Contact the firm through the contact page or call (561) 529-5873. Representative engagements are described on the Experience page.