When will the Connecticut DRS consider waiving a tax penalty?

On Behalf of | Oct 24, 2014 | Tax Controversies

The Connecticut Department of Revenue Services expects taxpayers to be diligent about filing their taxes in full and on time. Unfortunately, individuals, businesses, estates and other taxpayers miss the deadline sometimes, and that can mean a hefty late-filing penalty. It can feel like the tax man is just piling onto your debt — especially if the mistake wasn’t your fault.

Was there a reasonable cause for your failure to pay your Connecticut taxes on time? If so, the DRS has a plan. If you meet some basic criteria, you can ask for the late-filing penalty to be abated. The rules are strict, however, and you may find it advantageous to get legal advice before applying.

First, you can’t even apply for a penalty waiver until you’ve paid all of the taxes and interest due — before you apply. Waiver requests won’t even be considered for taxpayers with unfulfilled filing obligations or outstanding tax liability.

Assuming you’re paid up, the process is to file a Form DRS-PW (Request for Waiver of Civil Penalty) signed by the taxpayer or by the appropriate party at a business or estate. Send in that form, along with as much supporting documentation as you can, to the Department of Revenue Services’ Penalty Waiver Unit. Full contact information is available on the DRS’s website.

What does the DRS consider reasonable cause for filing late? Each case is considered individually, so there is no hard-and-fast rule. The basic question, however, is whether you could have anticipated the delay far enough in advance to allow you to file on time.

Suppose all the tax records you needed for your filing were lost in a fire. Would that be considered reasonable cause to file late? Not necessarily. If you had time to reconstruct those records before tax day, the DRS might not consider the late filing reasonable. If the happened a month before tax day and your taxes are complex, you may have had reasonable cause to file late.

What doesn’t count as reasonable cause? The DRS gives these examples:

  • You made a mistake.
  • You forgot to file.
  • You were ignorant of the law.

Obtaining a civil penalty waiver isn’t necessarily easy, but it can be done. For more information, read the DRS policy statement linked to below, or contact your own tax attorney.

Source: State of Connecticut Department of Revenue Services, “Policy Statement PS 2013 (5): Requests for Waiver of Civil Penalties,” Issued Sept. 20, 2013