Overview of IRS FIrst Time Abatement Program
First Time Abatement (FTA) is a one-time administrative waiver offered by the IRS to remove penalties for taxpayers who meet certain criteria. It’s designed to promote compliance by offering relief to taxpayers who have otherwise maintained a clean record but have made a one-time mistake. The FTA program applies only to specific types of penalties and is not available for all tax issues. However, FTA is available for the most common IRS penalties.
What Penalties Qualify?
The FTA program covers three main types of penalties:
- Failure-to-File Penalty: This penalty applies when a taxpayer does not file their tax return on time. It’s usually 5% of the unpaid taxes for each month the return is late, up to a maximum of 25%. Failure to file penalties assessed under IRC §§ 6651(a)(1), 6698(a)(1), or 6699(a)(1) are eligible for FTA.
- Failure-to-Pay Penalty: This penalty is assessed when a taxpayer fails to pay the taxes they owe by the due date. The penalty is generally 0.5% of the unpaid taxes per month, also capping at 25%. Failure to pay penalties assessed under IRC §§ 6651(a)(2) and IRC 6651(a)(3) are eligible for FTA.
- Failure-to-Deposit Penalty: This penalty assessed under IRC § 6656 is levied on businesses that fail to make required tax deposits on time, such as employment or excise taxes.
The IRS FTA does not apply to other penalties like accuracy-related penalties, fraud penalties, or penalties due to underpayment of estimated tax.
How to Qualify for First Time Abatement
To qualify for First Time Abatement, taxpayers must meet the following criteria:
- Clean Compliance History: The taxpayer must have had no penalties (other than those the IRS abated for reasonable cause) for the three tax years prior to the year for which they are requesting the FTA. This demonstrates that the taxpayer generally complies with tax requirements.
- Filing Compliance: All required tax returns for the prior three tax years must have been filed. The IRS will not grant an FTA if any tax returns are unfiled or if the taxpayer is currently non-compliant.
Additional criteria apply in some instances.
How to Request First Time Abatement
If you meet the criteria, you can request FTA in several ways:
- By Phone: Contact the IRS directly to request an FTA. The IRS can verify your compliance history and determine if you qualify.
- By Letter: You may also submit a written request to the IRS, detailing your situation and citing your eligibility for the FTA.
- When Filing Your Return: If you’ve already been assessed a penalty, you can request FTA when you respond to the penalty notice from the IRS.