Implemented by the Internal Revenue Service (IRS) in 2001 but infrequently used, it’s possible for certain taxpayers to avoid a tax penalty or get their money refunded from the IRS under its First Time Abate (FTA) policy.
“It’s like a get out of jail free card,” said Rosemary Sereti, managing director of Deloitte Tax and a former IRS senior executive, at the American Institute of Certified Public Accountants’ annual conference. However, she added, “Not every taxpayer qualifies.”
According to the IRS’ Penalty Relief due to First Time Abate or Other Administrative Waiver regulations, “You may qualify for relief from a penalty by administrative waiver if it’s your first tax penalty or you meet other criteria allowed under tax law.”
What Penalties Does First Time Abate Cover?
As the IRS points out, the agency’s administrative waivers provide relief to individuals and entities from specific penalties and under certain circumstances, the most common being First Time Abate. FTA can be requested if you have received an IRS notice for these three penalties, per the IRS:
1. Failure to File: When the penalty is applied to tax returns, partnership returns and S Corporation returns.
2. Failure to Pay: When the tax shown on the return is not paid by the due date or was required to be shown on a return, but was not, and that tax was not paid by the date stated in the notice or demand for payment.
3. Failure to Deposit: When the tax was not deposited in the correct amount, within the prescribed time period, and/or in the required manner.
Who Can Qualify for First Time Penalty Abatement
As H&R Block notes, there are qualifying conditions that need to be met to be considered for FTA, including having a clean record, with no penalties for the three tax years prior to the tax year in which you received a penalty.
Additionally, you have to be current on filing your tax returns (or have filed an extension) and you have to up-to-date on your tax bill payment or have arranged to pay any tax due.
“You have to be a good taxpayer that made a one-time mistake,” said Sereti. Comprehensive rules for this one-time tax penalty forgiveness can be found on the IRS site here.
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How To Request a First Time Abate Waiver
You can request a first-time penalty abatement by calling or by writing to the IRS. If you have received an official IRS notice about your penalty, there should be a toll-free contact number at the upper right-hand side of the letter. If you are sending a written request by mail, send a statement or fill out IRS Form 843, Claim for Refund and Request for Abatement. Supporting documents are not required as the IRS will review your account and determine if you are eligible for FTA.
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