If you owe taxes to the IRS, chances are you also have some penalties and interest attached to that tax debt. The IRS can penalize taxpayers for things like failure-to-file or failure-to-pay. Those penalties sit on top of your tax debt and can accumulate more interest and increase the taxes you owe. The IRS fortunately allows a first-time abatement for qualifying taxpayers. Most taxpayers don’t know about the first-time abatement (FTA) penalty wavier or how it can help them lower their tax debt.

In the past, about 70% of all penalties assessed by the IRS involved individual, business, and payroll penalties for failure to file, failure to pay, and failure to deposit. Most of these penalties are assessed automatically, regardless of the taxpayer’s situation and will continue accumulating until the liability is paid for in full. If you are assessed with penalties from the IRS, there are a few things you must do to qualify for the FTA penalty wavier in order for you to qualify for IRS penalty relief.

How to Qualify for A IRS Penalty Abatement

To qualify, you must be in compliance regarding your tax returns and your payments to the IRS. To meet the filing compliance requirement, you must have filed or filed an extension for all required returns and have no outstanding request from the IRS. This means if the IRS is waiting for you to file a certain year’s tax return, you must file it before you can request a penalty abatement. To make sure you are in compliance with your payments, you must have paid or arranged to pay any tax due. You can have an open installment agreement and request a penalty abatement, if your payments are current. And lastly, to qualify you must have a clean penalty history. This means you cannot be eligible for a penalty abatement if you had any penalties for the preceding three tax years.

How to Request an IRS Penalty Abatement

There are typically two methods for requesting penalty relief:

• You can file a penalty abatement after the IRS has assessed a penalty. You typically do this by writing a penalty abatement letter, calling the IRS, or using a tax professional.
• After the taxpayer has paid the penalty, you can request a refund through Form 843 “Claim for Refund and Request for Abatement”. You must file the claim within three years of the return due date, or within two years of the date the penalty was paid.

You may need supporting documents when you request a penalty abatement. If you are claiming a family member’s death prevented you from filing on time, you will need a copy of the death certificate. Other documentation items can include doctor’s notes, insurance claims related to theft, fire, or a natural disaster. Make sure when you send the documentation to the IRS you give them copies and not the original document. If you want to verbally request a penalty relief, it’s best if you contact your nearest IRS office and ask for a meeting. It is important to know, if your penalty abatement request is denied by the IRS, you cannot use the same reason to apply again. 

If you’re unsure of if you qualify for a penalty relief, or need help filing a wavier, Polston Tax can help! Our team of tax attorneys can not only help you file your penalty abatement wavier, they can also get you a resolution with the IRS so you can put your tax problems behind you! Call us today at 844-841-9857 or click here to schedule your free consultation.