Tax
Abatement
Definition
The reduction, cancellation, or complete forgiveness of an assessed tax liability, penalty, fee, or interest by the IRS.
Key Takeaways
- Consists of the cancellation or reduction of an IRS charge or penalty.
- Usually requested based on administrative errors, reasonable cause, or first-time penalty relief.
- Submitted using IRS Form 843 or through direct request procedures.
- Differs from a refund because it cancels an unpaid balance rather than returning paid cash.
Detailed Explanation
Abatement occurs when the IRS officially removes or reduces a tax penalty, interest assessment, or tax balance that was previously charged to a taxpayer's account. Abatements are typically granted due to administrative errors by the IRS, statutory postponements, or under the 'Reasonable Cause' guidelines (such as serious illness, natural disaster, or unavoidable disruptions). Taxpayers request abatement using IRS Form 843 or by calling the IRS directly for first-time penalty abatements.
Real-World Example A business owner filed their payroll tax returns late due to a severe hurricane that destroyed their office records. The IRS assessed a failure-to-file penalty. The owner submits Form 843 requesting a penalty abatement based on natural disaster disruption. The IRS reviews the claim, agrees that reasonable cause was met, and issues a penalty abatement, reducing the penalty balance to $0.
See Also:Form 843•Protective Claim