Allowed by the Internal Revenue Service
Most Taxpayers Are Missing Out
Beginning in Calendar Year 2001, the IRS began granting the First-Time Penalty Abatement (“FTA”) waiver to taxpayers who receive a Failure-to-File (“FTF”) or Failure-to-Pay (“FTP”) penalty but have a compliant tax history for the prior three years. The FTA waiver applies only to a single tax year.
The IRS can abate both penalties under certain circumstances.
According to a 2012 Treasury Inspector General for Tax Administration report, in 2010 about 1.65 million individual taxpayers qualified for FTA. However, according to the same TIGTA report, only 8.8% (less than 10%) of the taxpayers in the sample it tested actually received the abatement. The report indicates that the primary reason for this disparity is that most taxpayers do not know FTA exists. This is largely because the IRS does not indicate FTA as a relief option on its penalty-related notices. The IRS does not publicize the FTA.
For businesses and payroll clients, FTA applies to the failure-to-file, failure-to-pay, and/or the failure-to-deposit penalties. S corporation and partnership late-filing penalties also qualify under FTA. For individuals, FTA applies to the failure-to-file and failure-to-pay penalties. Estate and gift tax returns do not qualify for FTA waivers.
A taxpayer must have filed all tax returns for the past three years, as required, and have a clean three-year penalty history. The taxpayer cannot have penalties of a “significant” amount assessed in the prior three years on the same type of tax return.
If you need help taking advantage of this First-Time Penalty Abatement (“FTA”) Waiver or want to know if you qualify, call me or contact my office. It is nice to save money.
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