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A Review of Connecticut Tax Penalty Abatement

Connecticut Tax Penalty Abatement: A Comprehensive Guide

The Dreaded Tax Penalty Notice

You open the letter, heart pounding – it’s from the Connecticut Department of Revenue Services (DRS)1. And there it is, staring back at you: a penalty for failing to file or pay your state taxes on time2. Whether it’s a 10% late payment penalty, 25% negligence penalty, or something else entirely – those numbers add up fast3.But, take a deep breath. All is not lost. The DRS actually has procedures in place that allow you to request penalty abatement or waiver under certain circumstances4. Of course, navigating the process and building a strong case for abatement requires some know-how.

Understanding Penalty Abatement Basics

At its core, penalty abatement is the process of asking the DRS to remove or reduce penalties they’ve assessed against you5. The key? Demonstrating that your failure to comply with Connecticut tax laws was due to “reasonable cause” and not “willful neglect”6.What constitutes reasonable cause, you ask? Well, that’s where things get a bit nuanced. Essentially, the DRS wants to see that you made a good-faith effort to comply, but faced an undue hardship that was outside your control7. Some examples that may qualify:

  • Serious personal or family medical emergency
  • Natural disaster that impacted your records/ability to file
  • Incorrect advice from a tax professional
  • Death or serious illness of your tax preparer close to the deadline

On the flip side, the DRS is quite clear that the following generally won’t fly as reasonable cause:

  • Simple forgetfulness or oversight
  • Lack of funds to pay the tax (though this may open other resolution options)
  • Reliance on incorrect tax software calculations
  • Ignorance of the law

The First-Time Penalty Abatement Opportunity

Now, even if your situation doesn’t neatly check those reasonable cause boxes, there’s another huge opportunity: first-time penalty abatement8. If you have a clean penalty history for the prior three years, the DRS will typically grant one-time penalty relief, no questions asked9.Let’s run through an example:

Jamie has always filed and paid her Connecticut taxes on time. But in 2022, she was late getting her return and payment in, racking up $500 in penalties. Even though Jamie didn’t have a solid reasonable cause explanation, she can request first-time penalty abatement since she had a clean penalty history for 2019-202110.

For many taxpayers, that first-time abatement is a huge win – it wipes the slate clean to put those penalties behind you11. Just don’t squander that opportunity by racking up future penalties!

How to Request Penalty Abatement

Okay, so you think you may have a valid reasonable cause claim or qualify for first-time relief – what’s next? Well, you’ll need to properly submit your request to the DRS12.The key form is the DRS-PW: Request for Waiver of Civil Penalty13. You’ll need to fill this out, detailing:

  • The tax type(s) and period(s) involved
  • The specific penalty amount(s) you’re contesting
  • A clear explanation of your reasonable cause
  • Supporting documentation proving your claim

As for that documentation, think medical records, receipts, letters from tax professionals – anything that bolsters your case14. The more proof you can provide, the stronger your request.You’ll also need to certify that:

Christine Twomey
Christine Twomey
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Guerline Menard
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Taïko Beauty
Taïko Beauty
I don’t know where to start, I can write a novel about this firm, but one thing I will say is that having my best interest was their main priority since the beginning of my case which was back in Winter 2019. Miss Claire Banks, one of the best Attorneys in the firm represented me very well and was very professional, respectful, and truthful. Not once did she leave me in the dark, in fact she presented all options and routes that could possibly be considered for my case and she reinsured me that no matter what I decided to do, her and the team will have my back and that’s exactly what happened. Not only will I be liberated from this case, also, I will enjoy my freedom and continue to be a mother to my first born son and will have no restrictions with accomplishing my goals in life. Now that’s what I call victory!! I thank the Lord, My mother, Claire, and the Spodek team for standing by me and fighting with me. Words can’t describe how grateful I am to have the opportunity to work with this team. I’m very satisfied, very pleased with their performance, their hard work, and their diligence. Thank you team!
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divesh patel
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I can't recommend Alex Zhik and Spodek Law Firm highly enough for their exceptional legal representation and personal mentorship. From the moment I engaged their services in October 2022, Alex took the time to understand my case thoroughly and provided guidance every step of the way. Alex's dedication to my case went above and beyond my expectations. His expertise, attention to detail, and commitment to achieving the best possible outcome were evident throughout the entire process. He took the time to mentor me, ensuring I understood the legal complexities involved to make informed decisions. Alex is the kind of guy you would want to have a beer with and has made a meaningful impact on me. I also want to acknowledge Todd Spodek, the leader of the firm, who played a crucial role in my case. His leadership and support bolstered the efforts of Alex, and his involvement highlighted the firm's commitment to excellence. Thanks to Alex Zhik and Todd Spodek, I achieved the outcome I desired, and I am incredibly grateful for their professionalism, expertise, and genuine care. If you're in need of legal representation, look no further than this outstanding team.
  • You have no other outstanding Connecticut tax liabilities
  • You are current on all filing obligations
  • The facts in your request are true and accurate

Once complete, you can submit your DRS-PW request online through the DRS Taxpayer Service Center, by mail, or via fax15.

Timing Matters for Abatement Requests

Here’s a crucial point: there are strict time limits for requesting Connecticut penalty abatement16. Specifically, you must submit your DRS-PW form within one year of the penalty assessment date. That’s typically either:

  • One year from the date the DRS first notified you of the penalty
  • One year from the due date of the return that triggered the penalty (if you reported it yourself)

For example, let’s say you filed your 2021 Connecticut return late on July 1, 2022 and reported the late filing penalty. You’d then have until July 1, 2023 to request abatement for that 2021 penalty17.Missing that one-year window is an absolute killer for your abatement chances, so be sure to calendar those dates!

The DRS Review Process

Once you’ve submitted your request, it’s in the DRS’s hands for review and decision18. Who exactly handles it? Well, that depends on the total penalty amount you’re contesting:

  • For penalties under $5,000, the DRS Commissioner has sole discretion to approve or deny19
  • For penalties over $5,000, the request goes to a special Penalty Review Committee made up of the DRS Commissioner, State Comptroller, and Secretary of the Office of Policy and Management20

In either case, the DRS (or committee) will evaluate whether your stated reasonable cause holds water based on the documentation and explanations provided. They’ll also check if you meet the requirements for first-time penalty abatement.

Appealing a Denial

Let’s say your request for abatement is denied – don’t throw in the towel just yet. You have options to appeal that decision further.For most tax penalties, you can appeal to the DRS Appellate Division by filing a protest within 60 days of the denial date. This formal protest lays out your case for why the DRS was wrong to deny your abatement claim.If the Appellate Division still rules against you, your next step is to file an appeal with the Connecticut Superior Court. The court will conduct a fresh review of the facts and law.Of course, the appeals process adds extra hassle and legal fees. But for larger penalty amounts, it may be well worth pushing back against an improper DRS denial.

When Abatement Isn’t An Option

In some cases, the DRS simply cannot abate certain penalties by law. These include:

  • Criminal fraud penalties
  • Penalties for willful evasion or failure to collect/pay over taxes
  • Penalties imposed by the Connecticut courts

If you find yourself facing those types of non-abateable penalties, your focus will need to shift to other tax resolution options like:

  • An Offer in Compromise to settle the overall tax debt
  • Currently Non-Collectible status to temporarily pause collections
  • Bankruptcy protection for certain personal income tax debts
  • Innocent spouse relief if the liability stems from your spouse/ex-spouse

The path gets trickier, but all is not necessarily lost.

Get Professional Tax Help

Dealing with the DRS and navigating penalty abatement or other tax resolution pathways is no simple task. Between determining your reasonable cause, gathering supporting evidence, properly calculating penalty amounts, meeting deadlines – it’s easy for things to slip through the cracks when you go it alone.That’s why enlisting professional tax help is so valuable. An experienced tax pro can:

  • Evaluate your full situation to determine the best resolution approach
  • Properly prepare and submit requests/documentation to maximize abatement chances
  • Represent you before the DRS and in any appeals to fight for your rights
  • Explore other tax debt resolution options if abatement isn’t viable
  • Set you up for a clean slate and plan to avoid future penalties

When significant money is on the line with the DRS, it pays to have expertise in your corner. Even if you’ve already received a denial, a tax professional may be able to reopen your case and get a different outcome.

Establish a Plan to Stay Penalty-Free

Okay, let’s say you successfully navigate the abatement process and get those Connecticut penalties removed – congratulations! Your tax debt just got way more manageable.But don’t celebrate too much just yet. The key now is putting systems in place to ensure you remain penalty-free going forward. Some tips:

  • Use a good tax calendar to track all CT filing/payment deadlines
  • Enroll in electronic filing and payment methods to simplify compliance
  • Maintain good records/documentation in case of future DRS inquiries
  • Seek professional tax preparation help to ensure accuracy
  • Request filing extensions proactively if you need more time
  • Make at least the minimum estimated tax payments on time
  • Immediately resolve any DRS correspondence or notices

With some diligence, you can put those penalty troubles behind you for good. And if you do happen to make a mistake? Well, now you know the ropes for requesting abatement properly.

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