Greetings all...

I've have made some poor decisions in the past which obviously can't be undone. At this point, I'm trying to determine the best strategy to get things rectified while attempting to minimize IRS fees and penalties.

I provide IT support to small businesses and started a new LLC in 2010 that I registered as an S-Corp. I have not filed any taxes (personal or corp) up until a couple of months ago. At that time, I filed 2010 returns for both. My company is very small and essentially is a second job for me (I maintain a standard 40-hour/week job which is my primary income). I created the LLC/S-Corp to 1) provide personal liability protection, and 2) take advantage of corporate tax benefits.

My corporate tax liability was $0 for 2010. However, I received a letter from the IRS stating that they were assessing me a tax penalty for failure to file. The penalty was $2340 (12 x $195/mo, max of 12 months). I understand why they are assessing the penalty. However, this is a sizable penalty for me to absorb. Additionally, I know I will be hit with similar penalties for 2011-2012, and I'll be adding to that monthly for 2013 until I file. I'm going to try to work with the IRS to try to get them to reduce the penalty, but very well realize they may not. Regardless. I would like to take the strategy that has the greatest likelihood of succeeding.

What strategy should I pursue?

1. Get everything filed as quickly as possible, then attempt to work with the IRS?
2. Respond immediately to the IRS letter and try to negotiate on the 2010 return?
3. Other strategies (please advise)?

I look to try to maintain the LLC/S-Corp, but would also be willing to dissolve it and go back to a single member LLC or even sole-proprietorship. My business has decreased significantly in the past year, and so it may not be worth the hassle to maintain it. In the long run, I want to do what makes sense.

Any advice and recommendations you have are greatly appreciated. Thanks in advance!

My corporate tax liability was $0 for 2010. However, I received a letter from the IRS stating that they were assessing me a tax penalty for failure to file. The penalty was $2340 (12 x $195/mo, max of 12 months). I understand why they are assessing the penalty. However, this is a sizable penalty for me to absorb. Additionally, I know I will be hit with similar penalties for 2011-2012, and I'll be adding to that monthly for 2013 until I file. I'm going to try to work with the IRS to try to get them to reduce the penalty, but very well realize they may not. O .

==========>>>>>>>>>>>I guess so. Happily, the IRS can remove a penalty just as easily as it added one. The key to the kingdom of tax penalty relief is showing a reasonable cause for your failure to comply with tax law.


Regardless. I would like to take the strategy that has the greatest likelihood of succeeding.

What strategy should I pursue

1.Get everything filed as quickly as possible, then attempt to work with the IRS?
2.Respond immediately to the IRS letter and try to negotiate on the 2010 return?
3.Other strategies (please advise)?===========>>>>>>> Once you understand why and how the IRS hit you with penalties, you may request that they be reduced or eliminated. The IRS term for this process is abatement. About one-third of all penalties are eventually abated. I suspect that even more penalties would be canceled if people knew how to contest them. Just telling the IRS that you don’t like a penalty, or can’t afford to pay it, won’t work. You must show reasonable cause, meaning a good excuse. Any sound reason advanced by a taxpayer as the cause for delay in filing a return, making deposits … or paying tax when due will be carefully analyzed. some categories of excuses for abating any tax penalty except fraud:

1.Death or serious illness of the taxpayer or immediate family2.Unavoidable absence3.Destruction by fire or other casualty of the business or records4.Inability to determine the tax because of reasons beyond the taxpayer’s control5.Civil disturbances6.Lack of funds, but only when the taxpayer can demonstrate the exercise of ordinary business care and prudence7.Other reasons establishing that the taxpayer exercised ordinary business care but couldn’t comply within the time limits. As soon as you receive a tax notice with penalties, request an abatement in writing, To: Penalty Abatement Coordinator
IRS Service Center
P.O. Box 9941
Ogden, UT 84409
Re: Request for Penalty Abatement
From: Sanford Majors
43 Valley Road
Salt Lake City, UT 84000


State that you are requesting an abatement of penalties, identify the tax bill, and tell the IRS what your reasonable cause is. Attach a photocopy of the IRS notice showing the penalty, along with any documentation supporting your request. Keep several copies of your letters and attachments.Most penalties are imposed by the IRS Service Center that sent the tax bill, so mail your abatement request there—not to the local IRS office. The IRS is notorious for ignoring, losing, or taking forever to answer correspondence, so you may need to send additional copies later.Wait at least 45 days before sending your follow-up request. Photocopies of your first request and documents should be sufficient—just change the date of the request. If the IRS Service Center officially rejects your request, it will send you a written notice. To go further, take one or more of these actions:1.Write back asking for IRS appeals consideration. There is no IRS form for this—just write a clear letter headed “Penalty Appeal” and explain your reasonable cause. Attach the tax bill in question and any documentation supporting your case, like a doctor’s letter or accident report.2.Call or visit your local IRS office and speak with a customer service representative or a collection employee. They are authorized to consider reasonable cause applications and cancel penalties. Don’t mention that a Service Center turned you down. If you’re turned down again, ask orally and follow up in writing requesting that they forward your case for appeals consideration.3.File an Offer in Compromise based on doubt as to your liability for the penalty. This is a formal procedure for negotiating any unpaid IRS bill, including penalties. Don’t offer any money when contesting a penalty, because you are claiming that you don’t owe it. Follow the directions accompanying Form 656 precisely. Attach your explanation and documents supporting your position, if any.
4.Pay the penalty and then file IRS Form 843, Claim for Refund and Request of Abatement. Attach a letter and substantiating documents (as you did to your abatement request letter), or write your explanation in the space provided on the form. If your claim is refused, theoretically you can sue in U.S. District Court or the Court of Federal Claims for a refund. Seldom are tax penalties large enough to justify the expense of a lawsuit, however.In my opinion, I guess you may need to contact the Taxpayer Advocate Service in your state; this service is an independent organization within the IRS that can assist taxpayers in reducing tax penalties. You can locate your local Taxpayer Advocate office online at IRS.gov or by calling (800) 829-3676.