In an ideal world, everyone would maintain a strictly transactional relationship with the Internal Revenue Service (IRS). We pay our taxes, we file our tax returns on time, and we move on with our lives. This all changes when we end up coming up short on our tax bills or fail to file on time, however.
The IRS will come after what they are owed when they are aware you owe them. Failing to act quickly can result in additional penalties that make solving your situation feel even more insurmountable. Thankfully, the first time you end up facing penalties from the IRS, First-Time Penalty Abatement can get the penalty removed and help you stabilize your situation.
How It Works
First-Time Penalty Abatement is an administrative waiver available through the IRS that “provides relief from specific penalties under certain conditions.” Abatement is available to both individuals and businesses.
In order to take advantage of the abatement, you must first verify that you qualify.
First-Time Penalty Abatement Qualifications
The two main qualifications for abatement are that you must have been tax compliant for three years with no penalties and be currently tax compliant. If you have received a penalty previously but had it removed, you must have gotten the penalty removed for a reason other than a first-time abatement.
You are considered to be currently compliant if you have filed all your returns or filed a valid extension of time to file or are on a payment plan for all taxes due in all previous years.
To find out if you qualify, you can contact the IRS Practitioner Priority Service.
Penalties Eligible for First-Time Penalty Abatement
The following IRS tax penalties may be removed through a First-Time Penalty Abatement:
- Failure to File timely personal tax returns, partnership returns, and/or S-Corp returns
- Failure to Pay when the payment is past due
- Failure to Pay when the tax was not properly listed on your return
- Failure to Deposit the correct amount within the prescribed time period and/or in the required manner of deposit
One or more of these penalties can be removed during the same tax period, regardless of the penalty amount.
What if I Don’t Qualify?
If you don’t qualify for First-Time Penalty Abatement but still need to get a penalty removed, you must file for a Penalty Relief for Reasonable Cause Request. This gives you the opportunity to remove or reduce the penalty amount in situations where you have a legitimate, provable reason for being late or failing to file. Typically this will be a situation in which circumstances beyond your control prevented you from timely filing or paying.
If you file for a Reasonable Cause Request but are actually eligible for a First-Time Penalty Abatement, the IRS will instead apply the First-Time Penalty Abatement in removing your penalties. Getting out of trouble with the IRS can be complicated, but that’s why the team at Robert V. Boeshaar, Attorney at Law, remains dedicated to serving our clients. We help individuals and small businesses sort through situations just like this. Contact our team if you need help navigating penalties handed to you by the IRS.
Robert V. Boeshaar Attorney at Law, LL.M.,PLLC
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