IRS Updates Penalty Abatement Policy
The Internal Revenue Service (IRS) has recently updated its “first-time abate” policy, which is an administrative waiver offered by the IRS as a one-time penalty relief. This waiver is offered after consideration from the IRS, based on the taxpayer’s compliance and filing history.
Currently, the FTA penalty relief option applies to penalties related to a taxpayer’s failure to file, failure to pay and failure to deposit penalties. However, the modification disallows this relief to any taxpayer that is not current with filing and payment requirements. Current status means that the taxpayer must have all tax returns filed and paid. The taxpayer will still be considered current if they have filed their returns and have an open installment agreement with the IRS and are up-to-date on their installment payments.
Penalty abatement is not available to taxpayers filing the following forms: Form(s) 706, 709, 1120, 1120S. However, the IRS has warned that this list is not all-inclusive. The IRS has also noted that the first-time penalty abatement policy is only applicable to a single tax period of a single taxpayer, so if penalties are related to multiple years, the earliest year’s penalties will be eligible. Ultimately, the decision of acceptance and issuance of the waiver still belongs to the IRS, and is based on information provided by the taxpayer.
Any taxpayer who feels they have reasonable cause is encouraged to either speak with their tax professional or contact the IRS.
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