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Penalty Relief

If You Have Been Assessed A Penalty By The IRS You May Qualify For First-Time Penalty Relief

The IRS allows taxpayers with a clean compliance record to request first-time penalty relief under the First Time Abate (FTA) policy. FTA covers penalties such as Failure to File (FTF), Failure to Pay (FTP), and Failure to Deposit (FTD).

While this relief is referred to as a “first-time” waiver, the IRS does not require that you never had problems with late filing or late payment in the past.  The two key factors are either: (1) that you were not previously required to file a return, or  (2) delinquency penalties ( except estimated tax penalties) were not assessed against you in the three prior years.

First-Time Penalty Abatement Compliance Requirements

In order to qualify for first-time penalty abatement the taxpayer must have filed all required tax returns and paid or made arrangements to pay any taxes due. A taxpayer will be considered current with their taxes if they have an installment agreement in place and are in compliance with the agreement.

Example 1: ABC Partnership was formed in 2020 and filed its partnership return late and was assessed a late filing penalty. Since ABC was not required to file a partnership return prior to 2020, it qualifies for first-time abatement.

Example 2: Cayden files his 2020 tax return late and has a balance due. The IRS assesses the FTF and FTP penalties for 2020. After reviewing his 2017-2019 IRS  account transcripts it is determined that there were no penalties for those years. He has filed all required tax returns and has established a payment plan for 2020 with the IRS, and is current with his payments. Cayden qualifies for first-time penalty abatement and can request abatement of the FTF and FTP penalties.

Penalty abatement under FTA only applies to a single tax period for a taxpayer. If a request for abatement of penalties is under consideration for two or more periods, and the earliest period meets FTA criteria, penalty relief pursuant to FTA will apply only to the earliest period, and not for both periods. However, a taxpayer may request penalty abatement for subsequent periods based upon “reasonable cause”.

Example 3: Lissette filed her 2017 and 2018 tax returns late and owed taxes. She was assessed the FTF and FTP penalties for both years. She filed and paid on time for the years 2014-2016. She qualifies for FTA for 2017 since no penalties (other than estimated tax penalties ) were assessed during the prior three-year period. However, 2018 does not meet the three-year rule  and thus does not  qualify for FTA. The IRS will consider abatement of the 2018 penalties if Lissette can establish reasonable cause.

Get Help With IRS Penalty Relief

If you seek relief from IRS tax penalties call the tax professionals at East Coast Tax Consulting for a free consultation. We will review your situation and if you qualify, request abatement of IRS penalties under FTA or due to reasonable cause. Let us help you obtain penalty relief like we have helped so many other taxpayers.

Contact Us 

You deserve the best in IRS tax representation, tax preparation, and tax planning services. At East Coast Tax Consulting Group, you’ll work with a licensed CPA who will handle your case from beginning to end. We invite you to contact our team to schedule a free, confidential consultation.