Everyone makes mistakes, and many of us deserve a second chance. That’s the guiding theory behind the IRS First-Time Abatement program. This first-time penalty abatement waiver is a one-time reprieve for taxpayers who are normally compliant with tax responsibilities. This plan was enacted to provide penalty relief for taxpayers who have made a singular tax mistake, and understanding this amazing relief offering is essential for anyone currently in the throes of IRS debt.
Who Qualifies For An FTA?
Many taxpayers qualify for this penalty relief waiver, but few take advantage of it. The IRS first began offering the FTA penalty reprieve in 2001, and it was intended to reward first-time non-compliant taxpayers for a previous history of on-time payments. If your tax compliance history show no error for at least the past three years, or you have never filed taxes before, you may be eligible for first-time relief from several penalties. Individual taxpayers can request an FTA for failure to pay or failure to file, while business taxpayers can request an FTA for those, plus for the penalty to deposit payroll taxes. As long as you have paid all currently required returns, or if you have a payment arrangement already in place, you need no other reason to be granted an FTA.
Taxpayers may also qualify for an abatement under other provisions, like statutory provisions, administrative waiver provisions and reasonable cause, but these are completely separate from the considerations taken for an FTA.
How Do I Receive A First-Time Abatement Waiver?
The only way you’ll receive an FTA is to request it; the IRS is not readily advertising or extending this service to those who don’t ask. If you think you qualify for this First-Time Abatement waiver, use resolution services to ensure your request is created correctly. Working with a tax practitioner who knows the ins and outs of this commonly misunderstood process will ensure you the best chance of being granted a penalty reprieve.
Why Have I Never Heard Of An FTA Before?
While the IRS does provide many explanatory materials for those navigating the complicated world of taxes, their FTA doesn’t receive the same treatment. The FTA is not advertised by the IRS, meaning a significant portion of those who are eligible for this relief system likely don’t know it exists. In 2010, TIGTA found that 90 percent of taxpayers who qualified for an FTA didn’t receive the waiver, most likely because they didn’t apply for it in the first place. Over $181 million in penalty fees have gone unabated, even though the sum was applicable for FTAs.
Are There Any Non-Qualifying Taxes?
Any taxes that are event-based do not qualify for FTA waivers, e.g. estate and gift tax returns. Estimated tax and accuracy-related penalties are also not applicable for reprieve by an FTA waiver. The waiver also has its limitations. It is only applicable one time, and only to one tax year period.
Before You Request An FTA
There are things to consider before you send in your request. It may be that you qualify for reasonable cause relief, which can provide better and more comprehensive penalty abatement. However, if you apply for an FTA and the IRS finds you are also eligible for a penalty reprieve due to reasonable cause, they will automatically default to your FTA request. As this is a one-and-done service, you may cheat yourself out of having the chance to use it in future circumstances where you do not have reasonable cause. If you decide requesting an FTA is the right choice for you, make sure you prepare properly for the task ahead of you.
If you qualify for a first time abatement waiver, then you have great tax compliance history and no doubt have received large tax refunds in the past. Keeping that in mind, once you’re back on track with paying what you owe in full and on time for the next tax year or period, use any refund money you receive and stash it into an emergency tax savings so you’ll never find yourself in hot water with the IRS again.
A First-Time Abatement waiver can be an effective way to deal with a tax delinquency.This currently underutilized service could be your ticket to an erased debt. Knowledge is power, and understanding the FTA relief waiver is key if you are currently indebted to the IRS. Work with a tax professional to determine if this IRS-offered reprieve will help you settle unpaid debt and a little leeway for your history of compliance.
Hi, my name is Jon and I run Compounding Pennies. I’ve been interested in personal finance since high school and love writing and talking about it. You can learn more about me in the Authors section of this site.