Qualifying and Requesting IRS First Time Penalty Abatement Waiver
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Understanding the IRS First-Time Penalty Abatement
So, you’ve been hit with an IRS penalty – and it stings, right? Well, take a deep breath, because there’s a little-known relief program that could make that penalty disappear. It’s called the First-Time Penalty Abatement (FTA), and it’s the IRS’s way of cutting you a break – if you qualify. 1
Who Qualifies for the FTA?
The FTA is designed for taxpayers with a clean track record. 1 To be eligible, you must have:
- Filed all required returns on time for the past 3 years
- Paid, or arranged to pay, any taxes due for those years
- Not received any penalties for the past 3 tax years
In other words, if you’ve been a model taxpayer – the IRS might just forgive that one-time slip-up. 1
What Penalties Can Be Waived?
The FTA can remove three common penalties: 1
- Failure to File: If you filed your return late, this penalty is 5% of your unpaid taxes for each month the return is late, up to 25%.
- Failure to Pay: This 0.5% monthly penalty kicks in if you didn’t pay the taxes you owed by the due date, maxing out at 25%.
- Failure to Deposit: For employers who didn’t deposit payroll taxes on time, this penalty varies based on how late the deposits were.
So, if you were hit with any of those for the first time, the FTA could make them disappear – saving you some serious cash. 1
How to Request the FTA
Requesting the FTA is straightforward, but you’ll need to act fast. 1 You have two options:
- By Phone: Call the number on your IRS notice and explain you’d like to request a First-Time Penalty Abatement. The agent will review your account for eligibility.
- By Mail: Send a written statement or Form 843 to the address on your notice, clearly stating you’re requesting the FTA.
But here’s the catch – you generally only have 3 years from the return’s due date to request the abatement, so don’t drag your feet. 4
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What If I Don’t Qualify?
If you don’t meet the FTA criteria, all is not lost. 2 You can still request penalty relief by showing “reasonable cause” – in other words, a valid explanation for your mistake. 2 Some common reasonable causes include:
- Serious illness or injury
- Natural disaster
- Incorrect advice from the IRS
- Death or serious illness of a family member
To request this, you’ll need to provide a detailed explanation and supporting documentation with your written request. 2 It’s a bit more work, but it could still get those penalties removed.
A Penny Saved…
Look, nobody likes paying the IRS more than they have to. But penalties happen, and when they do, it pays to know your options. The First-Time Penalty Abatement is a great way for typically compliant taxpayers to get back on track without that extra financial sting. 1So