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Anybody ever successfully get out of paying a tax penalty?
Posted on 8/4/15 at 11:05 pm
Posted on 8/4/15 at 11:05 pm
Got a huge tax bill, interest charge, and tax penalty from the IRS. Turns out that my wife withdrew money from her retirement plan to give to a family member about to lose his house. She didn't realize that in addition to having taxes deducted automatically at the time of the withdraw, that we had to report the withdraw as income on our tax return. Wish she had told me, but I can't fault her for helping her family. With the taxes, interest, and penalty, we basically ended up with an effective 55% tax rate on the withdraw. I wrote the IRS explaining what happened and requested that the penalty be dropped. They responded stating that it was her responsibility to be familiar with tax codes and that the law requires us to pay the steep penalty.
Anybody ever successfully get out of a tax penalty charge?
Anybody ever successfully get out of a tax penalty charge?
9
Posted on 8/4/15 at 11:20 pm to Ramblin Wreck
I protested once.....
Posted on 8/5/15 at 2:29 am to Ramblin Wreck
Posted on 8/5/15 at 6:29 am to Ramblin Wreck
Don't waste your time on that one. I've gotten plenty of clients out of penalties, in fact I'll be writing a protest letter for abatement today and I'll get it.
But, you have to have a basis for a protest or request for abatement. You don't have one. Rules are clear on this one. Penalty is not arbitrary or subjective. Rules are not overly complicated here.
Unless you don't have the means to pay it, and want to go after an offer in compromise, forget it.
But, you have to have a basis for a protest or request for abatement. You don't have one. Rules are clear on this one. Penalty is not arbitrary or subjective. Rules are not overly complicated here.
Unless you don't have the means to pay it, and want to go after an offer in compromise, forget it.
Posted on 8/5/15 at 8:13 am to Ramblin Wreck
So your wife withdrew money from her retirement plan(which is 50% yours depending on the state) and gave it to a family member without even talking to you?
I'd be more worried about paying the divorce lawyer than the tax penalty
I'd be more worried about paying the divorce lawyer than the tax penalty
Posted on 8/5/15 at 8:20 am to yellowfin
She should have just taken a 401k loan.
Posted on 8/5/15 at 8:21 am to yellowfin
quote:Yeah this is kind of head scratching.
So your wife withdrew money from her retirement plan(which is 50% yours depending on the state) and gave it to a family member witho
Posted on 8/5/15 at 8:24 am to Ramblin Wreck
I won on an innocent spouse issue.
Posted on 8/5/15 at 9:17 am to yellowfin
quote:
So your wife withdrew money from her retirement plan(which is 50% yours depending on the state) and gave it to a family member without even talking to you?
Her retirement employee savings plan is basically nonexistent compared to my employee account. I do our taxes and would have known to include the withdraw as income. Yes, there were much cheaper options than the way it was done, but that is water under the bridge now. It's not like she used the funds to pay gambling debts.
As far as your joking comment about a divorce over something that minor, I think the financial implications would be a lot worse than any IRS penalty.
Posted on 8/5/15 at 9:30 am to Ramblin Wreck
quote:
As far as your joking comment about a divorce over something that minor
Just my unsolicited two cents, but the spouse taking a retirement withdrawal and not even discussing it with you is pretty bad IMO. Not just the fact that she didn't discuss that she was taking y'alls money out of a retirement plan, but that she didn't even bother telling you she was giving it away. Sorry but that ain't good....
. Also, you're going to pay. There just isn't any gray area to work in here. It's pretty cut and dry.
Posted on 8/5/15 at 10:28 am to Ramblin Wreck
I don't think being dishonest about finances is minor but hey.....everyone's different
Posted on 8/5/15 at 11:53 am to Ramblin Wreck
You can always request an abatement of penalties using Form 843. The IRS is not likely to abate penalties in the case of unreported income when you were issued an information return, Form 1099-R in this case, identifying the amount of income you were required to report. You can provide the IRS with any reason you like for why the penalties should be abated, but the best explanations will claim you made a good faith effort to file a complete and accurate return, and that the omission was not intentional and the facts and circumstances that caused the omission (ignorance of the law is not a valid reason). Throwing in some verbiage about the penalties being excessive for the effective administration of the income tax system for a once in a lifetime event is pretty common.
Good luck.
Good luck.
Posted on 8/5/15 at 1:48 pm to Ramblin Wreck
I got out of paying a penalty once. After I proved their error.
They tried to charge me back interest but I showed them the notice of receipt return slip when I filed for an extension.
They tried to charge me back interest but I showed them the notice of receipt return slip when I filed for an extension.
Posted on 8/5/15 at 9:24 pm to Ramblin Wreck
Check out the First-Time Abate. It's an administrative waiver that doesn't require a good "excuse" -- you may qualify if you have a good compliance history.
It's discussed in IRM 20.1.1.3.6.1
It's discussed in IRM 20.1.1.3.6.1
Posted on 8/6/15 at 8:19 am to Ramblin Wreck
It's tough, the mantra is usually some variation of ignorance is not an excuse. On a clear cut and dry case like this, I'd be surprised if you got out of it.
Assuming you have a clean history, I would argue it was a one time screw up.
Assuming you have a clean history, I would argue it was a one time screw up.
This post was edited on 8/6/15 at 8:21 am
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