The IRS officially states that the purpose of penalties is to foster a system of voluntary compliance with the tax code, not to generate additional revenue for the Government. So when drafting a penalty abatement letter, we recommend emphasizing facts that demonstrate you are blameless and showing steps taken towards voluntarily compliance with the tax code. If you made an error, explain why the error or oversight occurred.
It is important to introduce a tax penalty case in a manner designed to allow the IRS agent to easily follow what happened, why a penalty was asserted, and what, if any, steps were taken to rectify or mitigate the problem(s). Each fact pattern may require a different style of organization, but generally a penalty abatement letter should hold the following sections:
As soon as a penalty is proposed or assessed by the IRS you should take steps to write a persuasive penalty abatement letter, as there may be legal time limits for requesting relief. For your benefit, we created a sample penalty abatement letter and an annotated sample penalty abatement letter to help demonstrate what should be included in a persuasive request.