Abatement Penalty Waiver
Many have forgotten or don’t know about the IRS first-time penalty waiver program (FTA). This program was introduced more than 15 years ago but still remains a little known method of getting assessed penalties abated for a first-time non-compliant taxpayer for a single tax period. Abatement Penalty Waiver.
Individual taxpayers may request an FTA for a failure file or failure to pay penalty. Business taxpayers can request an FTA on the previously described penalties or a payroll tax deposit penalty.
This penalty abatement request should be taken advantage of only if other penalty relief provisions have been examined and not deemed applicable or have been exhausted.
To qualify, the taxpayer must demonstrate timely filing and timely payment compliance and have a clean three year penalty history. The taxpayer may have an open installment agreement with the IRS as long as the payments are current.
To satisfy the clean penalty history, the taxpayer must not have had any “significant” penalty amounts assessed in the prior three years for the same tax return for which the taxpayer is requesting abatement. If the IRS rejects the request for abatement because there is some minor penalty during the time frame, the taxpayer or his advisor should remind the IRS of the “significant” qualification in the IRM. Even if the taxpayer has a tax penalty in the prior three years but has a clean history other than that, he may be eligible for relief given his track record.