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IRS First Time Penalty Abatement – FTA

The first-time penalty abatement (FTA) waiver is an administrative waiver that the IRS may grant to relieve taxpayers from failure-to-file, failure-to-pay and failure-to-deposit penalties if certain criteria are met. The policy behind this procedure is to reward taxpayers for having a clean compliance history; everyone is entitled to one mistake.

Individuals and businesses may request FTA for any failure-to-file, failure-to-pay or failure-to-deposit penalty. FTA does not apply to other types of penalties such as the accuracy-related penalty, returns with an event-based filing requirement like Forms 706 or 709 and information reporting that is dependent upon other various filings.

To qualify for the FTA waiver, a taxpayer must meet the following criteria:

Filing compliance: Must have filed (or filed a valid extension for) all required returns and can’t have an outstanding request for a return from the IRS.

Payment compliance: Must have paid or arranged to pay all tax due (can be in an installment agreement if the payments are current).

Clean penalty history: Has no prior penalties (except a possible estimated tax penalty) for the preceding three years.

FTA only applies to one tax year/period. If a request for penalty relief is being considered for two or more tax years/periods and the earliest tax year/period meets FTA criteria, penalty relief based on FTA only applies to the earliest tax year/period. Penalty relief for all subsequent tax years/periods will be based on other relief provisions, such as reasonable cause criteria.

If the IRS hasn’t assessed the penalty, for example, a client is filing a return late and failure-to-file and failure-to-pay penalties will apply, the taxpayer may attach a penalty non-assertion request to the late-filed return.

If a taxpayer has already paid the penalty, he or she may file Form 843, Claim for Refund and Request for Abatement, to request a refund. If the IRS doesn’t grant penalty relief, consider taking the case to Appeals. Appeals may make a different decision based on other factors, such as hazards of litigation.

The FTA can be requested via phone or mail.

If you need assistance in requesting a first-time penalty abatement, contact the law firm.

IRS First Time Penalty Abatement – FTA

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