If at first you don’t succeed… A taxpayer that is seeking an abatement on penalties will initially have to make the request through the Collections Division or other functions within the IRS. When unsuccessful at this level, it would be wise to escalate the request to the IRS Appeals Division. Appeals is independent from the Collections Division and is tasked with resolving disputes on a fair and impartial basis without litigation.
The Treasury Inspector General for Tax Administration (TIGTA) recently conducted an audit to evaluate whether penalties assessed against taxpayers were fully or partially abated in accordance with Appeals criteria. On July 30, 2015 TIGTA issued a statement on its findings, noting that Appeals has the authority to abate certain penalties when the abatement request has been denied by another function within the IRS. Furthermore, the statement pointed out that in Fiscal Year 2013, Appeals abated approximately $127 million in penalties.
Generally, the audit found that in most cases, Appeals properly accepted cases in which the IRS operating division had previously denied the taxpayer’s request for abatement. There were, however, a number of penalty appeals cases that were not abated in accordance with Appeals criteria. TIGTA noted that in some cases, they could not determine the justification that Appeals personnel used in granting the penalty abatement. Additionally, the Treasury also determined that a small number of processing errors and control weaknesses might have affected the outcome of penalty abatement decisions at the Appeals level.
While the audit went on to conclude that additional training was necessary for Appeals Technical Employees on the requirements for justifying, documenting and granting abatement on penalties, it nonetheless illustrated the point that Appeals is an effective venue for a second chance at abatement of penalties.
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