I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.
See all posts Frank GogolHow to Write an Explanation Letter to the IRS
Updated on April 26, 2024
Written by
Written by
Reviewed by
Rohit Mittal
Reviewed by
Rohit Mittal
Rohit Mittal is the co-founder and CEO of Stilt. Rohit has extensive experience in credit risk analytics and data science. He spent years building credit risk and fraud models for top U.S. banks. In his current role, he defines the overall business strategy, leads debt and capital fundraising efforts, leads product development, and leads other customer-related aspects for the company. Stilt is backed by Y Combinator and has raised a total of $275M in debt and equity funding to date.
See all posts Rohit MittalGiven how complex and challenging it is to file your taxes and how easy it is to make errors, you might have to write an explanation letter to the IRS explaining your mistake and asking them to forgive you for your mistakes. An explanation letter is not just any letter. If executed poorly, you could very well face jail time for the errors you committed while filing your taxes.
Hence, you must write your explanation letter in the best possible way to avoid penalties of any kind. You should know the exact way the letter is supposed to be written and how your reasoning is to be executed to make sure you remain in the good graces of the person in charge of deciding your fate.
At a Glance
- An explanation letter, also known as a letter of explanation, clarifies discrepancies or provides explanations for unusual activity in records.
- It is crucial for creating a positive impression when applying for benefits or addressing mistakes.
- Individuals may need to write an explanation letter to the IRS for tax-related issues or to request a penalty reduction.
- Different formats and samples are available based on specific circumstances, and truthfully stating personal reasons is crucial.
What Is An Explanation Letter?
An explanation letter or a letter of explanation is any letter used to explain any discrepancies in your records, such as financial records or tax records in the case of the IRS. Sometimes, it might not be anything but just unusual activity for you, or sometimes you might need to explain and ask to be excused over any mistake you might have made.
An explanation letter is essential as it decides if the person in – charge of your application has a good impression of you or not.
Who Needs To Write An Explanation Letter To The IRS?
Anyone who wishes to explain some unusual activity on their taxes for the previous year to clarify to the Income Tax officer that they have a very plausible explanation to their income can write an explanation letter detailing their basis.
The other reason you might want to write a letter of explanation to the IRS is to ask for a reduction of any penalty levied on you for not filing your taxes correctly. You need to use a different format if this was your first–time offense or if this is a repeated offense. Also, depending on the seriousness of your offense, you will have to write in a different context as well. For example, there’s a different way to write your letter asking for abatement for more than one year.
How To Write An Explanation Letter To The IRS?
Depending on your requirement, there are different samples for you to look at and write a letter of explanation to the IRS. It is different for asking for abatement of the penalty of one year and abatement of the penalty of more than one previous year, as shown below. Try not to make any changes in the letters but make sure that your personal reasons are truthfully written instead of blindly copying from this article. That would cause you more problems than it solves.
Letter Sample For First–Time Penalty Abatement
The IRS will allow a first–time penalty abatement for those taxpayers that could not pay, could not file, or could not deposit their taxes if they can meet certain conditions. If you feel that you could qualify for such situations, then here’s a sample letter for you to understand how to write a letter of explanation:
Internal Revenue Service
Penalty Abatement Coordinator
[Address that is mentioned on the notice of the IRS sent to you]
Tax form number: ____ period of taxation: ____
Reg: request for abatement of penalty under the administrative waiver of the FTA
[Name or names of the taxpayers]
[Address of the taxpayer(s)]
[SSN or TIN]
Dt: MM /DD / YYYY
To whomever it may concern:
[I/ we am/ are] writing this letter to request the failure to [file/ pay/ deposit] penalty on [my/ our] tax records be abated based on IRM 20. 1. 1. 3.6. 1 that discusses rules for RCA and first-time abate administrative waiver. This is regarding the [specific] amount levied on [me/ us] as a penalty.
[I/ we] believe [I/we] meet the requirements for this penalty waiver because [I/ We] satisfy the following conditions:
Thank you for your consideration. If there is any further explanation or clarity required on [my/our] part, please feel free to reach out to [me/us] on [my/our] phone number [write your phone number here].
Sincerely,
[Names of you and all those that are applying with you]
Penalty Abatement Coordinator
[Address that is mentioned on the notice of the IRS sent to you]
Tax form number: ____ period of taxation: ____
Reg: request for abatement of penalty under the administrative waiver of the FTA
[Name or names of the taxpayers]
[Address of the taxpayer(s)]
[SSN or TIN]
Dt: MM /DD / YYYY
To whomever it may concern:
[I/ we am/ are] writing this letter to request the failure to [file/ pay/ deposit] penalty on [my/ our] tax records be abated based on IRM 20. 1. 1. 3.6. 1 that discusses rules for RCA and first-time abate administrative waiver. This is regarding the [specific] amount levied on [me/ us] as a penalty.
[I/ we] believe [I/we] meet the requirements for this penalty waiver because [I/ We] satisfy the following conditions:
- Complaint with filing: [I/We] filed all required returns and extensions without having any pending tax return requests or abatements either.
- Clean penalty history for three years: [I/We] have not incurred any tax penalties for the past three years as [I/ We] have always paid my taxes right.
- Complaint with payments: [I/We] have paid all [my/our] tax dues so far or set up payment agreements which [I/We] [am/are] current with.
Thank you for your consideration. If there is any further explanation or clarity required on [my/our] part, please feel free to reach out to [me/us] on [my/our] phone number [write your phone number here].
Sincerely,
[Names of you and all those that are applying with you]
Letter Sample For Abatement Of More Than One Year After Getting A Letter
If you are writing a letter for abatement for more than one year after receiving a letter, you will need a slightly different format to write to the IRS. A format sample is provided below:
Internal Revenue Service
Penalty Abatement Coordinator
[Address that is mentioned on the notice of the IRS sent to you]
Tax form number: ____ period of taxation: ____
Reg: request for abatement of penalty.
[name or names of the taxpayers]
[Address of the taxpayer(s)]
[SSN or TIN]
Dt: MM /DD / YYYY
To whomever it may concern:
[I/We] [am/are] requesting an abatement of [amount you have penalized] about the tax payment of [amount of tax over which you are taxed and later penalized] as was assessed in the enclosed envelope dated [MM/ DD/ YYYY].
The reason why [I/ we] [paid/ filed] late [or failed to deposit] was because [clearly specify and mention your reason here, it is preferable to keep it brief and to the point]
Please find the enclosed [supporting document (s)] here. (Do not send your original documents, rather photocopies will be enough)
[I/we] wish that you would kindly accept [my/ our] petition requesting for abatement of penalties requested in this letter due to a reasonable cause as defined in IRM 20. 1.1. 3. 2. If you wish to have any further explanation or any questions regarding the same, kindly reach out to [me/ us] on the phone number: [write your phone number here]
Sincerely,
[Names of you and all those that are applying with you]
Penalty Abatement Coordinator
[Address that is mentioned on the notice of the IRS sent to you]
Tax form number: ____ period of taxation: ____
Reg: request for abatement of penalty.
[name or names of the taxpayers]
[Address of the taxpayer(s)]
[SSN or TIN]
Dt: MM /DD / YYYY
To whomever it may concern:
[I/We] [am/are] requesting an abatement of [amount you have penalized] about the tax payment of [amount of tax over which you are taxed and later penalized] as was assessed in the enclosed envelope dated [MM/ DD/ YYYY].
The reason why [I/ we] [paid/ filed] late [or failed to deposit] was because [clearly specify and mention your reason here, it is preferable to keep it brief and to the point]
Please find the enclosed [supporting document (s)] here. (Do not send your original documents, rather photocopies will be enough)
[I/we] wish that you would kindly accept [my/ our] petition requesting for abatement of penalties requested in this letter due to a reasonable cause as defined in IRM 20. 1.1. 3. 2. If you wish to have any further explanation or any questions regarding the same, kindly reach out to [me/ us] on the phone number: [write your phone number here]
Sincerely,
[Names of you and all those that are applying with you]
Read More
- Why Was No Federal Income Tax Withheld From My Paycheck?
- Why Do I Owe Taxes?
- Why Do I Owe State Taxes?
- Are You Exempt from Federal Withholding?
- How to File Taxes With No Income
- Can You File Taxes Without a W2?
- H1B Taxes: Everything You Need to Know
Final Thoughts
Thus, different situations will require you to write a letter of explanation in different formats for the IRS. In each case, the result depends on presenting your reasons for requesting the abatement. Hence, it is advisable to have all your causes with written proof and send them to the IRS to help your case as much as possible. Make sure you do not have any other unusual activity of any kind under your name. If you have, make sure to explain any doubts the concerned officer might have.
Frequently Asked Questions (FAQ)
What is an Explanation Letter to the IRS?
An explanation letter to the IRS is a written communication used to provide clarity or justification regarding tax filings, discrepancies, or any issues related to your tax account.
When Should I Send an Explanation Letter to the IRS?
Send an explanation letter when responding to an IRS notice, clarifying discrepancies in your tax return, or providing requested documentation or explanations.
How Should I Format an Explanation Letter to the IRS?
The letter should be clearly written, professionally formatted, and include your contact information, tax identification number, and relevant tax year or notice number.
What Information Should I Include in the Letter?
Include specific details about your tax issue, any relevant figures, explanations for discrepancies or errors, and any supporting documentation.
Is it Necessary to Reference Specific Tax Forms or Notices?
Yes, reference specific tax forms, line items, and IRS notices to ensure clarity and accuracy in addressing the issue.
How Do I Submit the Explanation Letter to the IRS?
Submit the letter to the IRS address provided in their correspondence or as instructed on their official website, typically via mail.
Should I Keep a Copy of the Letter and Correspondence?
Always keep a copy of the letter, along with any correspondence and documentation sent to or received from the IRS.
Can I Seek Professional Help in Drafting the Letter?
Yes, it’s often advisable to consult a tax professional or attorney when drafting a letter to the IRS, especially for complex issues.
What Tone Should I Use in the Letter?
Use a respectful and professional tone, regardless of the nature of the issue or your sentiments about it.
How Quickly Should I Respond to the IRS?
Respond promptly, typically within the timeframe specified in the IRS notice, to avoid additional issues or penalties.
Frank Gogol
I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.