First Time Penalty Abatement: Who Qualifies?

Understanding First Time Penalty Abatement

First Time Penalty Abatement (FTA) is a key relief program offered by the IRS to help taxpayers who have a good compliance history. This program allows eligible taxpayers to request the removal of certain penalties, providing relief under specific conditions. Understanding FTA can help you or your business save money and keep a clean compliance record.

Who Qualifies for First Time Penalty Abatement?

Qualifying for FTA requires meeting specific criteria outlined by the IRS. Understanding these can help you determine your eligibility:

• No Penalty for the Prior Three Years: The IRS mandates that you must not have been penalized for the same issue in the preceding three tax years.
• Compliance with Filing Requirements: All required returns or extensions must have been filed currently to be eligible.
• Payment of Due Taxes: If you owe taxes, arrangements must be in place to pay them. This can include full payment or an IRS-approved payment plan.

Refer to IRS Revenue Procedure 2013-29 for more details.

Types of Penalties Eligible for Abatement

Inspect which penalties may be abated under the FTA program. Generally, these include:

• Failure-to-File Penalties: Penalties for not filing your tax return on time.
• Failure-to-Pay Penalties: These penalties occur if you don’t pay the taxes you report on time.
• Failure to Deposit Penalties: Penalties typically levied against businesses for not depositing certain taxes correctly.

More on eligible penalties can be found in the IRS First Time Abate guide.

Actionable Steps to Request FTA

Here’s how you can apply for First Time Penalty Abatement:

1. Contact the IRS: Start by calling the IRS directly at 1-800-829-1040. Be ready with your tax information and explain your request for FTA.
2. Write a Penalty Abatement Request Letter: Include your personal details, tax information, and a well-reasoned explanation of why you qualify for FTA. Reference the previous 3-year compliance history.
3. Consult a Tax Professional: Consider seeking guidance from a tax professional to ensure your request is precise and compelling.
4. Monitor Your Request: Keep track of communications and follow up with the IRS if necessary to confirm they received and are processing your request.

What Happens If Denied?

If your request is denied, you can seek further clarification or decide to appeal the decision. A tax professional may assist in assessing why the abatement was denied and how to proceed further.

Conclusion

Understanding First Time Penalty Abatement can be a valuable resource for managing your tax obligations effectively. If you're eligible, applying for an FTA can provide significant financial relief.

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