Penalty Abatement

Situation

In spring 2024, a client was referred to me to resolve several years of unfiled personal tax returns (IRS). Back in 2018, my client became the sole provider – financially and emotionally – for her granddaughter and great-grandchildren due to a serious health crisis that left a family-member unable to provide. Under the weight of mounting medical and financial responsibilities, filing taxes fell behind.

Challenge

Two major obstacles shaped this case.

The first was ineffective and insufficient prior representation. Before coming to me, my client had worked with a well-known national tax relief company and paid them $20,000 upfront. In return, their support amounted to little more than filing federal returns and arranging a basic installment plan for the full tax debt – something my client could have handled herself. Worse, they failed to file New York State returns and never clearly communicated that oversight, leaving the client exposed to additional risk.

The second challenge was fines and net worth. While my client had the assets to cover her full liability, the reality of her financial pressures during the relevant years told a different story. My role was to bridge that gap – to negotiate a payment arrangement that not only reflected my client’s means on paper but also acknowledged the strain my client was actually under, securing the most favorable outcome possible.

Approach

• Obtained power of attorney and did an extensive transcript review.
• Devised a two-part approach to gain penalty and interest abatements – a First Time Penalty Abatement and a Reasonable Cause due to the family’s situation.
• Created and documented financial statement(s) as required by the IRS for each year with a tax liability.
• Researched and ruled out other options available under IRS laws, notably an Offer-In-Compromise (OIC), Partial Pay Installment Agreement (PPIA), or Currently Not Collectible (CNC), as those would not be beneficial strategies to use in her situation.
• Negotiated with the IRS to secure a payment plan for the balance of the liability at the lowest cost to my client per month.

Results

• Secured First Time Penalty Abatement along with Reasonable Cause to reduce most of her penalties due (saved over $60K).
• Achieved an affordable installment agreement with the IRS for the remainder of her 2018-2020 liability.
• Amended my client’s 2021 return after finding an error – which led to a $31K refund.
• Prepared and filed my client’s 2023 and 2024 tax returns.