What is Tax Penalty Abatement?

Atlanta Tax Penalty Abatement Attorney

Let’s say you accidentally fail to correctly pay or file your taxes. The IRS then hits you with penalties that seem unfair, especially if you’ve never made a tax mistake before. The most common IRS penalties are failure-to-pay (used when a taxpayer fails to pay their taxes on time), failure-to-file (used when a taxpayer doesn’t file their tax return on time) and failure-to-deposit (when a business doesn’t pay/incorrectly pays employment taxes).

Now imagine that a little-known provision could have saved you from these penalties, or at least reduced them.

The first-time abatement (or “FTA”) penalty waiver is an IRS provision that is not well known, but it allows taxpayers who make a first-time mistake to request a reduction in their tax penalties. Despite the fact that the waiver was introduced 15 years ago, this potentially money-saving provision is rarely utilized by taxpayers.

Steps to Apply for FTA Waiver

To apply for an FTA waiver, you must first meet three elements:

1) Filing. You need to have filed all required tax returns. If you still have an outstanding IRS request for a tax return, you must file it.

2) Payment. You have paid all taxes that are due, or you have arranged to pay them through an installment agreement. If you have an installment agreement, your payments must be current.

3) No prior penalties. To qualify, you cannot have had any tax penalties for the previous three years. This excludes estimated tax penalties.

How Do I Request Penalty Abatement?
You can make a request for abatement in a few different ways.

a. The first is by preparing and mailing a written petition to the IRS. This is a letter which explains how you qualify for abatement. You will mail this letter to the address listed on the IRS assessment letter you received, along with supporting documentation laying out the reason for your request

b. The second is by completing and mailing IRS Ford 843, which is titled “Claim for Refund and Request for Abatement.” This form can be confusing, and must be filed within three years of the tax return due date, or within two years of the date you paid the IRS penalties.

c. The third is by phone request, in which you call the IRS and explain how you qualify. If you prefer to meet with an IRS employee face-to-face, you can call your local IRS office and request an in-person meeting to explain your request for penalty abatement. However, you may need to set aside 2 – 3 hours for your call or meeting.

IRS Tax Penalty Tips

Helpful Tips
Penalty abatement can only be requested for one tax year. If you owe penalties to the IRS for more than one tax year, you can may have your penalties abated for the oldest year, but not for any years after that.

If the IRS denies your abatement request, then they will not approve a second request using the same reasons you provided with your first request.

As stated above, you can’t qualify for penalty abatement if you have incurred any penalties during the past three years. You also cannot qualify if you’ve received IRS penalties for understatement of your income, civil fraud, negligence, criminal activity, or early retirement withdrawal.

If you mail a written request, do not mail original copies of your supporting documents. Send copies of what you send, in the event that the IRS does not respond or your letter is lost in the mail.

If you choose to mail in your request, the IRS should respond within 60 days. If they don’t, send another copy of your letter and any supporting information.

Call Us!
While we hope the information above is helpful, tax penalty abatement (like any tax issue) can be extremely complicated. With master’s degree in tax law from Emory University School of Law and decades of experience, Jeffrey L. Cohen is fully prepared to handle your tax-related issues. Mr. Cohen has knows how to deal with the IRS on behalf of his clients, and will use his knowledge and experience to help you find solutions.

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