IRS Form 843: An SMB Owner's Guide to Getting Out of IRS Penalties

Filling out complicated tax forms isn't anyone's idea of a good time, but one can be especially beneficial for business owners facing penalties from the Internal Revenue Service.

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Form 843, Claim for Refund and Request for Abatement, allows you to request a refund or abatement of certain taxes, penalties, or interest.

So, what's an abatement? In the context of taxes, abatement simply means reduction or removal. That's right: you can ask the IRS to reduce, remove, and sometimes even refund certain taxes, penalties, fees, and interest.

In this guide, we’ll cover how to use Form 843 to ensure you don't leave any money on the table that rightfully belongs in your budget.

Takeaways:

• Taxpayers use Form 843 to ask the IRS to remove or reduce penalties.
• Form 843 is relatively simple, but it’s important to fill it out completely and accurately to improve your chances of the IRS accepting your claim.
• It usually takes anywhere from three to four months for the IRS to process Form 843
• Working with a tax professional can ensure your submission is complete and accurate.

What is Form 843?

Form 843 is a multipurpose form used by individuals and businesses to request the refund or removal of various taxes, interest, and penalties.

Before you get too excited, you probably can't wipe out your entire tax bill or avoid penalties for not bothering to file a return.

However, if you simply made a mistake or relied on bad advice, Form 843 can benefit your business by ensuring you only pay what you truly owe.

When does a business use Form 843?

Here are a few examples of when this form might come in handy.

1. First-time abatement of penalties. Mistakes happen. You may have filed your taxes late or missed an estimated payment. If you have a good compliance history—meaning you've filed your returns on time and haven't received any other penalties during the prior three years—you can simply ask the IRS to waive the penalty under First-Time Abate Relief. Note that this only applies to penalties—not taxes or interest.
2. Reasonable cause. If you were late due to reasons beyond your control (like a natural disaster or medical emergency), you can use Form 843 to ask the IRS to remove penalties due to reasonable cause.
3. Bad advice. Even experts don't always get it right. If you relied on incorrect written advice and the IRS hits you with an accuracy-related penalty, you can request penalty relief using Form 843 by demonstrating that you took steps to comply with the tax law.
4. Payroll tax issues. If someone withheld payroll taxes from your pay in error and refuses to correct it, you can use Form 843 to request a refund or reduction of FICA taxes or federal unemployment taxes.

Form 843 is for more than just income taxes. You can use it for issues stemming from payroll taxes, estate and gift taxes, excise taxes, and information returns like W-2s and 1099s. Keep in mind there's a deadline for requesting a refund or abatement. That deadline is three years from the filing date of your original return or two years from the date you paid the tax, whichever is later. If you try to request abatement outside of this window, the IRS will likely deny your request.Next, let’s cover how to fill out Form 843 to improve your chances of approval.

‍How to fill out Form 843

‍Filling out Form 843 correctly gives you the best chance of getting it processed and accepted. Here are step-by-step instructions for completing each section.

‍Section 1: Identifying information

‍Like most tax forms, Form 843 starts with entering information to identify you and your tax return.

• Your name and Social Security number (or the legal name of your business and employer identification number (EIN) for a business return)
• Current mailing address
• Daytime telephone number

Section 2: Tax period, amount, type of tax and penalty

On lines 1 and 2, specify the tax year for which you're requesting a refund or abatement and the amount requested. If your petition applies to several tax periods, complete a separate abatement form for each period.

On line 3, indicate the specific type of tax (income, payroll, excise, etc.) to help the IRS direct your form to the appropriate department.

On line 4, enter the type of penalty assessed. You need to enter the Internal Revenue Code section, which should be on the IRS notice you received. If you don't have a notice, check with a tax professional.

Section 3: Claim information

On line 5a, check a box to indicate why you deserve a refund or abatement. If you already paid the penalty, interest, or fee, enter the date you paid it on line 5b.

On line 6, enter the form applicable to your request.

Section 4: Explanation

Provide a clear, detailed explanation of your claim. Include any specific laws, circumstances, or notices that support your claim. The more detailed your explanation, the better the IRS can evaluate your request. If you need more space, you can include an attachment.

Include any relevant documentation, like copies of notices or other communications from authorities and other supporting materials. For example, if you ask the IRS to remove a late filing penalty because a hurricane damaged your business records, include copies of insurance claims to prove your loss.

Section 5: Signature

Sign and date the form, and have your spouse sign and date it as well, if the request applies to a jointly filed individual return. If your accountant or attorney completes and files it for you, they need to enter their information in the Paid Preparer section.

The next crucial step is submitting Form 843

Before sending your request to the IRS, review it one more time to ensure you included all the necessary information and attachments. Errors or missing information can lead to processing delays or rejections of your claim.

Unfortunately, you can't electronically file Form 843—you must mail it.

The mailing address depends on the nature of your claim and your location. You can find the right destination in the Instructions for Form 843. Make sure you send it to the correct place to avoid delays.

Consider sending your request via certified mail or another trackable service for added security and peace of mind.

Keep a copy of the filled-out form and all accompanying documents for your records. You might need them if the IRS loses your submission (IRS errors are unfortunately quite common) or the agency has questions about your claim.

Processing time for Form 843

Now that you've submitted your 843 claim for refund, when can you expect to hear whether your request was approved? Let's just say, don't hold your breath.

It usually takes about three to four months to process your form and make a decision. Of course, that timeline may be longer or shorter depending on the complexity of your claim and the IRS's overall workload when you submit it. Processing times are usually longer during the filing season, from mid-January to April 15.

If you haven’t heard from the IRS within the expected timeframe, check on the status of your application by calling the agency at the phone number shown on your notice.

Other related forms

Here are a few other forms you might need to manage compliance.

• Form 1040-X: Amended U.S. Individual Income Tax Return. Don't use Form 843 if you realize you made a mistake on a previous tax return. Instead, use Form 1040-X to amend that return and potentially receive a refund of your overpaid taxes.
• Form 2848: Power of Attorney and Declaration of Representative. Use this form to authorize someone else, like your accountant or attorney, to represent you. For example, if you want your accountant to call the IRS to discuss penalties or check on the status of your request, they'll likely ask you to sign a power of attorney document.

Common issues with Form 843

Form 843 is relatively simple—at least as far as tax returns go. However, a few common issues can trip you up and cause your claim to be delayed or even denied. Here are a few issues to look out for.

• Incorrect or incomplete information. Before mailing Form 843, double-check it to ensure you included the correct taxpayer identification numbers, addresses, tax year, and other details. Even minor typos can lead to delays or rejections of your claim.

• Using the wrong form. Don't use Form 843 for issues it’s not designed to deal with, such as amending your return.
• Timing issues. Remember, you generally need to submit Form 843 before the statute of limitations expires: within three years from filing the original tax return or two years from the date you paid the tax.
• Mailing the form to the wrong place. Where you mail Form 843 depends on the nature of your issue and where you live, so confusion is understandable. Call the IRS or check with a tax professional if you have questions.

Get expert advice for dealing with Form 843

‍If requesting a claim for refund seems messy and confusing, you're not alone. Plenty of business owners need help dealing with income tax issues. But don't just let the federal government keep your money or resign yourself to paying a penalty you might not owe.

Reach out to an experienced professional for help. Whether you turn your paperwork over to them entirely or just get a second set of eyes on your abatement request, a tax pro can help ensure your Form 843 is accurate and complies with IRS rules.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.