I hope you have managed to stay safe and well! We focus on resolving tax issues in Prince William County and throughout the lower Northern Virginia area.

Penalty abatement should be on your radar anytime you have a substantial obligation to the Internal Revenue Service/ U.S. Treasury.  Of course, you must have a plan of attack for asking (and being granted) relief for penalties imposed for not complying with the rules contained within the Internal Revenue Code (IRC). Of course, with the size of the IRC being in excess of 7k pages, it is easy for the average taxpayer to find themselves out of compliance and potentially out of more money than they would have originally owed. 

There are several approaches to making a successful request for penalty relief. One of which, is blaming your last accountant/tax preparer (Bad Accountant defense).  Using this tact, the request would go something like:  We (the Taxpayers) have had a long history of payment compliance prior to issues that arose with our former accountant, which caused the compliance issues.

Our former accountant, Acme Accounting, Inc. (“Acme”), provided services for our personal affairs as well as our businesses Widget Star (“Widget”) and Bit, Inc. (“Bit”) between 2012 and 2016.  According to Acme’s website, Acme brings “over 45 years experience to the small business owner who is faced with decreasing profitability, increasing taxes, tax notices/surprises, or simply wanting more time.” 

Thus, we entrusted Acme to provide accounting services and prepare and file their individual tax returns in addition to Widget and Bit’s business income returns.   We had significant trouble reaching Acme for extended periods.   Acme also provided tax advice, later found to have further harmed our tax situation.

After we became aware of the extent of our tax issues, we hired  Rubble, CPA (“Rubble”) to prepare and file their individual tax returns and business tax returns. Rubble spent countless hours cleaning up Bedrock’s mess so that the 2016 returns could be filed. However, unbeknownst to us, Rubble was amidst a divorce and would be unable to see his case through to the end. Thus, we lost another professional that we hired to assist with our tax problems and further delayed the filing of the return.  During this period, we entered into an installment agreement to attempt to repay our tax liability but with our accounting in such disrepair, we were unable to make the payments.

You get the point. Taxpayers can make the case that they  clearly had no intention of disobeying the taxing statutes – they hired what they thought were competent professionals to help them the moment they started their businesses. Penalties for late payment of tax and accuracy related penalties are governed by IRC §§ 6651 and 6662. In both sections, a taxpayer can have the penalties abated if it can establish that the failure to comply with the rules was due to reasonable cause and not due to intentional disregard.  26 C.F.R. § 301.6651-1(c)(1)

If ever you’re feeling overburdened by your tax situation or you’d rather be doing something else with your time, just remember we’re here to help you with all of your tax preparation, resolution/representation needs.  Now and in the future. Don’t put off addressing your tax situation. Feel free to contact us with any questions you may have in approaching your specific tax scenario.