What is Abatement?
Taken from the French word abattre and the Latin word battere, both meaning "to beat," abatement in its simplest terms means "to beat something down." When discussed in terms of finances, abatement is the beating down or lessening of debt or taxes. Also known as a tax cut or tax relief, an abatement is a helpful measure used to reduce the amount of taxes or debt a party must pay on his or her personal property, business, or inheritance. An abatement can help a financially struggling party or organization that is unable to meet financial obligations.
An abatement of debt and legacies provides protection when a person dies and does not have enough money left in his or her estate to meet all financial obligations. If a person files for abatement of debt and legacies, the estate's executor then asks for leniency in meeting the debts. Interest payment, tax amounts, and debt totals can be abated or lessened to help the estate meet the debt obligations.
IRS penalty abatement is often authorized to help citizens meet their IRS tax penalties. Providing the taxpayer made an honest mistake, the IRS is often willing to grant penalty abatements in order to allow the taxpayer to pay back the penalty over time. Often, the IRS will ask for a valid reason for the incorrectly declared taxes. As long as substantial proof or explanation is provided, penalty abatement offers a chance to meet obligations without enduring severe financial hardship.
In a select number of states, elderly homeowners are often allowed an abatement on their property taxes, town water bills, and sewer bills if they can prove hardship. Tax abatement also offers lower property taxes for organizations or businesses located in areas in need of economic revitalization. This special abatement is awarded to companies that use a portion of their savings to purchase new business equipment, computer systems, or other critical business upgrades to help the business expand or become more efficient. It also allows companies to upgrade without being immediately hit with a much higher tax bill. Typically, this form of tax abatement reduces the tax bill for no more than ten years.
Written by Shannon Kietzman
