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Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 300
Experience:  Former IRS Revenue Agent
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Received a letter stating a $2,500 fine for late filing of

Customer Question

Received a letter stating a $2,500 fine for late filing of my business taxes this year. All k-1s were submitted to the IRS. The business was only open for a little over a year and is no longer operating. The only fine we received was for late filing.
For the First Time Abatement, I understand that you must have a positive 3 year track record. Will we still be able to use FTB to reduce the fee if the business was not even open that long? The first year's filings were submitted on time.
Submitted: 1 month ago.
Category: Tax
Expert:  Dr. Fiona Chen replied 1 month ago.

Dear Customer,

Request for penalty abatement any way.

List all the reasons you have or can think of or relate to.

1) Have you filed your last tax return if the business in no longer in operation? This step needs to be done. If it is closed in 2016, then, state so in your abatement request.

2) Some of the acceptable reasons for the IRS are such as, relying on expert (your CPA, return preparer, or attorney's advice). They did not file in time. They did not file the extension application. They did not remind you to file in time, etc. There are circumstance out of your control, such as illness, etc. which not only interrupted your tax return filing, it also affect your life in general.

3) Make sure that late filing charge in the IRS letter is done correctly. The IRS routinely issues this penalty wrongfully in terms of number of shareholders. Make sure that they did the calculation correctly. Otherwise, challenge and abate the penalty on this ground.

4) It is now Sept. 2016. So, you are talking about 2015 tax return. Did you file the 2015 tax return? If you have submitted all K-1s, then, you must have filed the return.

5) One of the grounds you can say that all the K-1s were issued and everyone on the K-1s have correctly reported their tax liabilities correctly.

6) It sounds like that you are talking about 2014 tax return. If it is 2015, it is hardly that you filed all K-1s and you are still asserted with late filing penalties.

Make sure that you double check the math of month of late filing the IRS did is correct.

7) You may want to say that in your first year filing, you are late because you did not have the experience and for some reason you were late.

Was there record lost? Some horrible events beyond your control?

8) When you plead for abatement, use everything you can, find a professional to help you if necessary. Some professionals may be willing to help you with just several hundred dollars. Then, it is still worthwhile.

9) If your abatement request is rejected, you will be given opportunity to appeal to the penalty coordinator. Then, you can appeal to the IRS Appeal Office. Then, to the tax court. Some place in the middle of the process, maybe, the IRS is willing to cut the penalty into half or something like that to give you and them a break.

10) I have had a taxpayer who wrote and called the IRS like seven or eight times on the same penalty when this S Corporation shareholder penalty just started. Not many people know that this penalty or any penalty abatement really does not have a statute of limitation strictly. The IRS eventually cut the penalty half to half with her. Her issue was that the postage on the envelope is not clear to show the date of putting into the mail. So, they were counted one month late.

11) The key is not to give up. The key is also regardless of the rule of three years history, etc., you already have a reason to state that your business did not have a history, etc. and it is closed shortly. You did not have experience. There was no intention to not following the law. Blame on your accountant. That is the easiest excuse to use. In most of the time, it is the true reason.

12) Sometimes, the IRS also make decision based on other considerations in addition to filing history.


Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP

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