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What criteria must be met to receive relief from IRS penalties?

If any IRS employee or officer in Georgia or any other state gives bad written advice to a taxpayer and the IRS charges the taxpayer with a penalty as a result, the taxpayer may file for relief of the penalty during a specific time period. This can result in a credit or refund if he or she already paid the penalty. Though this law does not apply to oral advice, the IRS may provide relief based on poor oral advice at its discretion.

If a taxpayer goes to a tax advisor about a complicated or technical tax matter and receives bad advice that results in any penalties, that taxpayer may qualify for relief of those penalties. This does not excuse penalties for failure to file, deposit or pay taxes. The IRS normally limits this type of relief to accuracy-related penalties, though it may include other penalties in some circumstances.

If a major emergency or disaster occurs that prevents the taxpayer from filing on time, such as a tornado, hurricane or earthquake, the IRS will normally grant extensions for all people living within the affected area. It may also evaluate each case individually based on the circumstances and facts surrounding the case to determine whether to grant relief of any associated penalties.

These penalties could result in an IRS levy if the taxpayer does not handle them quickly. Every situation is different, and this information is not a replacement for an attorney's advice and services. An attorney could explain the requirements for penalty relief and could help the taxpayer in preparing and filing the paperwork with the IRS. It is important to ensure that all of the information on the paperwork is complete and accurate to avoid any further issues.

Source: IRS, "Part 20. Penalty and Interest", December 21, 2014

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