IRS Penalty Relief: First-Time Penalty Abatement

For all the doom and gloom surrounding “the IRS” — a mere mention of the federal agency is enough to make some taxpayers shudder — plenty of people might be surprised about how willing representatives are to help taxpayers settle tax liabilities and penalties. The IRS is typically more lenient toward taxpayers without a long rap sheet. In other words, you’re more likely to receive penalty relief for your first tax violation. In this situation, the First-Time Penalty Abatement (FTA) procedure might be available to you. 

FTA Does Not Reduce Your Taxes

Unfortunately, FTA will not let you off the hook for your tax liabilities or reduce your taxable income. It only applies to IRS penalties. Furthermore, FTA does not even apply to all penalties that may be assessed by the IRS. It can only help with penalties resulting from the following violations: 

  • Failure to file
  • Failure to pay
  • Failure to deposit

Both individuals and businesses may apply for FTA. The COVID-19 pandemic and subsequent fallout led the IRS to offer expanded penalty relief to taxpayers. 

Who is Eligible for FTA?

The IRS lays out three conditions taxpayers must meet before they should apply for FTA. The requirements are as follows: 

  • You haven’t accrued any penalties in the three tax years prior to the tax year for which you were assessed a penalty. This doesn’t apply if you were not previously required to file a tax return. 
  • You have either paid all your tax due (not penalties) or made an arrangement to pay outstanding tax liabilities. The IRS considers this requirement to be satisfied if you have a payment plan and are current with your monthly payments. 
  • You have filed all tax returns currently required by the IRS or already requested an extension to file. 

How Should You Request FTA?

The IRS allows taxpayers to apply for FTA by phone or by mail. Especially large penalties might be better settled through a mail application, but the easiest way to find out whether that’s the case is to make a call to the IRS. Depending on your penalty amount, you could settle your request for FTA over the phone. Even if sending a letter isn’t necessary in your case, it could be a good idea to follow up in writing. 

A Tax Attorney Can Help

Sure, hiring a tax lawyer to help you settle a dispute with the IRS is an extra expense on top of the taxes and/or penalties you are already struggling to pay. The value in tax savings and peace of mind with the help of an effective tax attorney can be many times more than the amount of the fee. Our firm can navigate you through whatever tax matter you’re dealing with and help put your stresses behind you. Get in touch with our team and set up a free initial phone consultation today.

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