Details On How First-Time Penalty Abatement Work

We understand that the tax code in The United States can be pretty confusing, and sometimes, one can accidentally break the rules and get hit with penalties from the IRS. However, the good news is that the IRS has a program called First-Time Penalty Abatement (FTA) that can help eligible taxpayers get those penalties waived. Let’s take a look at how first time penalty abatement works.

Eligibility Criteria

In order to qualify for FTA, having a clean compliance history is non-negotiable. This means that you should not have had any penalties or penalty abatements for the 3 years before the year you are requesting for this. After meeting the requirements, request the waiver of certain penalties, such as failure-to-file, failure-to-pay, or failure-to-deposit penalties.

Here’s a more detailed explanation of the eligibility criteria:

  • Previous History: The IRS determines eligibility by examining the taxpayer’s compliance record for the past 3 years before the year they want the FTA. This means that any penalties received by the taxpayer during those years will end up in disqualification from getting FTA for the requested year unless these were minor penalties below $100.
  • Filing Requirements: Any taxpayer wanting first time penalty abatement must file all returns for the 4 years under consideration, including the current year and the 3 previous ones. Failure to submit the documents will bar them from this opportunity.
  • Payment Agreement Compliance: During the time of application, the taxpayer cannot be negligent on any payments that are due to the IRS, nor their enrollment in a payment plan if they owe taxes. If the taxpayer entered into a payment agreement but remains compliant with its terms, they would still be eligible for FTA. However, noncompliance with the schedule would render the taxpayer ineligible for FTA until they become current again.
  • Application Process: It is possible to apply for FTA via various channels, such as online, via mail, or by directly getting in touch with the IRS. When submitting an application, taxpayers should include relevant information such as their Social Security number, contact details, and proof of compliance with the above conditions.

What Documentation is Required to Support a First-time Penalty Abatement Request?

Other than no penalties in the past 3 years and timely filing records, there is no other requirement of specific documents to apply for first-time penalty tax abatement. However, you will need to prove the reasons for late filings or payments if asked. If approved, the FTA removes penalties immediately or after taxes are paid off. Rejected applications can be appealed within 30 days.

Moreover, it is crucial to note that FTA only applies to penalties on a specific tax period and does not cover all types of penalties. Other than that, it is a one-time consideration, so you can only use it for a first-time penalty charge.

Closing Note

In a nutshell, taxpayers with good compliance behavior, maintained up-to-date filings and their adherence to payment agreements when applicable, gives them an edge when qualifying for first time penalty abatement. It is essential to know that every case is evaluated individually based on specific circumstances, and the IRS has the lawful right to deny requests even if the applicant meets the general eligibility criteria.

If you are in a situation similar to this, do not hesitate to consult with a skilled lawyer from our firm. We can help you in every way possible. Get in touch with our attorneys from Edwards Sutarwalla Samani LLP in this regard. Call us at (713) 565-1353 for more information.


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