What This Letter Means

Letter 2804C tells you the IRS denied your request to abate the civil penalty for furnishing false information on Form W-4. The penalty is $500 for each false statement. It applies when your W-4 caused less income tax to be withheld from your pay and there was no reasonable basis for what you claimed at the time you gave it to your employer.

You asked the IRS to remove the penalty. The Withholding Compliance unit reviewed your request, and the answer was no.

The Standard Is Reasonable Basis

This penalty isn't judged by the reasonable cause standard used for late filing or late payment penalties. The question is whether you had a reasonable basis for the W-4 when you signed it. The IRS accepts reasons tied to your expected tax, such as:

  • You figured the withholding by following the form instructions.
  • You can show the correct filing status and withholding would have produced the same or less withholding.
  • You relied on incorrect information from an IRS employee, and that can be verified.

The IRS does not accept illness, lost records, overpaying a tax liability, personal finances, or moral, religious, political, or constitutional arguments.

The law also lets the IRS waive the penalty when your income tax for the year is no more than your credits plus estimated tax payments. If your withholding and credits covered your tax for that year, say so and show the numbers.

What to Do

  • Appeal. You have the right to appeal a denied abatement request. Follow the instructions in the letter and include any facts and records that show a reasonable basis.
  • If you already paid. A paid penalty can't simply be abated. You need to file Form 843, Claim for Refund and Request for Abatement.
  • Check your withholding. If your employer received a lock-in letter, it may stay in effect even if the penalty is resolved. Fix your W-4 going forward.

An unpaid penalty is a balance due. It will follow the normal collection notices if you ignore it.

If you received Letter 2804C and want to fight the W-4 penalty, call us at (813) 229-7100.