Who Is Eligible for Relief Under the IRS's First Time Penalty Abatement Policy?

 Posted on July 22, 2022 in Taxation Law

U.S. taxpayers are generally required to file annual tax returns, and if the proper forms are not filed by the applicable deadlines, a person may face a failure-to-file penalty. Failure-to-pay penalties may apply if a person does not pay any amounts owed at the time they file a tax return. These penalties may cause significant financial difficulties. Fortunately, taxpayers have options for penalty abatement. One option available in certain situations is a first time abatement (FTA) waiver.

Eligibility Requirements for First Time Abatement

First time abatement is a one-time option that may allow a taxpayer to receive relief from failure-to-file or failure-to-pay penalties. Employers who have been assessed failure-to-deposit penalties may also qualify for FTA waivers. If a request for penalty abatement is granted, the taxpayer will not be required to pay the penalty.

To qualify for an FTA waiver, a person will need to meet the following requirements:

• Filing requirements - A taxpayer must have filed all required tax returns, or they must have filed an extension request that will allow additional time before filing. If a failure-to-file penalty has been assessed, filing the tax return that led to that penalty will be necessary before the taxpayer can receive penalty abatement.

• Payment of taxes owed - If a taxpayer is required to pay taxes to the IRS, they must pay the amounts owed or make arrangements to do so, such as by setting up an installment agreement. Failure-to-pay penalties will continue to apply until all taxes owed have been paid, and interest will also apply to unpaid payments. To ensure that a taxpayer can receive relief from failure-to-pay penalties, it may be best to pay off the full amount owed before seeking penalty abatement.

• No penalties in previous years - A taxpayer will only qualify for first time abatement if no penalties had been assessed during the 3 tax years prior to the year in which they received a penalty.

First time abatement will only be available for a single tax year. If penalties were assessed in multiple years, a taxpayer may receive an FTA waiver for the earliest year. Other options for abatement may be available for subsequent years, such as relief due to reasonable cause.

Contact Our San Jose Tax Penalty Abatement Attorney

Tax penalties can be difficult to deal with, but taxpayers may have multiple options for eliminating penalties and reducing the amount owed to the IRS. At John D. Teter Law Offices, we can advise you on whether you qualify for first time abatement or other forms of relief, and we will advocate for you with the IRS. To learn how we can help you receive relief, contact our San Jose, CA tax lawyer at 408-866-1810.

Sources:

https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-first-time-penalty-abatement-or-other-administrative-waiver

https://www.irs.gov/irm/part20/irm_20-001-001r#idm139761452348912