The Internal Revenue Service (IRS) is notorious for assessing fines and penalties against taxpayers who don’t follow their rules. You may be surprised to learn that the Tax Code also provides penalty relief under certain circumstances. If you have been penalized by the IRS, you may qualify for a first time abatement waiver. However, the waiver only applies to three specific penalties, and you must meet certain criteria to qualify under the regulations. An experienced tax lawyer can help quickly determine your eligibility.
What is a First Time Abatement Waiver?
The IRS is granted extensive power to deal with tax return filing problems and mistakes. In some cases, taxpayers don’t file a return when they are legally obligated to file, or they don’t pay the tax they owe, or they fail to deposit taxes on time.
The IRS can fine you for each of these mistakes. If you don’t address the problem, the penalties can be overwhelming. However, if you meet certain legal requirements, you can claim a first time abatement waiver to resolve these penalties and move forward with a clean slate.
The First Time Abatement Waiver Addresses Three Penalties
The first time abatement waiver, known as the First Time Abate (FTA) in section 220.127.116.11.3.2.1 of the Internal Revenue Manual, which serves as an internal guide for IRS employees. Under the FTA, a taxpayer can request relief the first time he is penalized for a single return under three situations:
- When a taxpayer owes taxes but doesn’t pay the amount owed, he can receive a failure to pay (FTP) penalty;
- When a taxpayer doesn’t file a tax return, he can receive a failure to file (FTF) penalty; or
- If a taxpayer is obligated to deposit taxes but doesn’t make the deposit as required, he can receive a failure to deposit (FTD) penalty.
The penalty amount accrues until it is either paid in full or waived by the IRS. If you qualify, an experienced tax lawyer can help you pursue an FTA waiver.
Which Taxpayers Qualify for the First Time Abatement Waiver?
The IRS does not forgive fines and penalties lightly, and the FTA waiver is only granted in limited circumstances. To qualify you cannot have accrued any penalties in the past three tax years and must meet these two criteria:
- You must have filed all required tax returns or filed a valid request for an extension of time to file; AND
- You must have already paid any tax currently due or made arrangements to pay your tax obligation (usually through a payment plan), and your scheduled payments must be current.
Technicalities Affecting FTA Relief
Even if you meet the requirements listed above, several technicalities can affect your eligibility for an FTA waiver.
Tax Return Filing Status
If the penalized tax return was filed as married filing jointly but the prior three years of returns were filed under a different filing status, or not under the same primary Social Security number, the FTA waiver criteria must be met for both filing parties and both Social Security numbers.
Relief for Only One Tax Period
The FTA penalty relief only applies to one specific tax period if the qualifying criteria have been met. A tax period may be a taxable year or even a quarterly time frame if the taxpayer is obligated to pay quarterly tax installments.
FTA Waiver Standards Are Considered First
In general, tax penalties may be addressed through administrative processes, such as FTA waivers, or in non-administrative actions based upon arguments that the taxpayer had reasonable cause for his or her actions and should not be penalized. If a taxpayer meets the FTA criteria, the penalty waiver will be applied without the need to prove reasonable cause.
The IRS May Apply an FTA Waiver without a Taxpayer’s Specific Request
A taxpayer does not have to specifically request an FTA waiver to be eligible for penalty relief. If the IRS finds one or more penalties remain after all other account discrepancies have been addressed, and if the taxpayer meets the necessary criteria, the FTA waiver may be applied without the taxpayer’s formal request. However, a taxpayer who has accrued fines or penalties cannot depend on the IRS gratuitously applying such relief.
Turn to a Respected Carmel Tax Lawyer
If you have received a penalty notice from the IRS for failing to file your tax return, failing to pay your taxes, or failing to deposit taxes as required by law, you may be eligible for FTA relief. Like most tax matters, the rules are complicated. But you don’t have to face the IRS alone. Count on the team at Camden & Meridew, P.C. to help resolve your tax problems. You’ll find a trusted Carmel and Fishers tax penalty lawyer from our firm with years of experience serving clients facing overwhelming tax debts. Don’t put off your tax concerns any longer. For questions about a first time abatement waiver or other tax matters, call Carmel tax lawyer Julie Camden today at 317-770-000 or contact us online to schedule a convenient initial consultation.