Tax Resolution Program Spotlight: First-Time Penalty Abatement (FTA)

Tax penalties can quickly escalate your tax debt, making an already stressful situation even more difficult to manage. Fortunately, the IRS offers a relief option called First-Time Penalty Abatement (FTA).

 

What Is First-Time Penalty Abatement?

First-Time Penalty Abatement (FTA) is a program offered by the IRS to provide relief from certain penalties for taxpayers who have a good compliance history. It’s designed to help individuals or businesses who encounter penalties for the first time due to unforeseen circumstances or honest mistakes.

The most common penalties eligible for FTA include:

  • Failure to File: Penalties for not filing your tax return by the deadline.
  • Failure to Pay: Penalties for not paying your tax liability on time.
  • Failure to Deposit: Penalties related to employment tax deposits for businesses.

Under the FTA program, the IRS may waive these penalties for one tax period, providing significant financial relief. However, interest on the penalties may not always be removed, so it’s essential to understand the program’s scope fully.

 

Who Can Qualify for First-Time Penalty Abatement?

To qualify for FTA, taxpayers must meet the following criteria:

  1. Clean Compliance History:
    You haven’t had penalties for the three tax years prior to the year you’re requesting abatement for.
  2. All Filing Obligations Met:
    All required tax returns must be filed before applying for FTA.
  3. No Outstanding Tax Balances:
    You must either pay the tax you owe or set up a payment plan to address the outstanding balance.
  4. Reasonable Cause May Not Be Required:
    Unlike other penalty relief programs that require taxpayers to demonstrate a reasonable cause for their issues, FTA is based on prior compliance, making it more accessible for eligible taxpayer

 

First-Time Penalty Abatement Example

Scenario:

Sarah, a self-employed graphic designer, missed the deadline to file her tax return because of unexpected family medical emergencies. She owes the IRS $10,000, and penalties for failure to file and failure to pay have added $1,500 to her tax bill.

Sarah consults a tax resolution specialist, who determines that she qualifies for FTA because she has no penalties in the past three years, has filed all prior returns, and is working on paying her balance.

Result:

The specialist submits a request to the IRS for first-time penalty abatement on Sarah’s behalf. The IRS approves the request, waiving the $1,500 in penalties. Sarah can now focus on paying the original $10,000 tax balance without the added burden of penalties.

 

How We Can Help You with First-Time Penalty Abatement

Requesting penalty abatement is a precise process that requires understanding IRS policies and providing the right documentation. At [Your Company], we make it easy for you to take advantage of this program. Here’s how we help:

  • Evaluating Your Eligibility: Our Tax Resolution Specialists review your account to confirm if you qualify for FTA based on your compliance history and current tax situation.
  • Submitting the Request: We’ll handle all communication with the IRS, preparing and submitting a complete request to maximize your chances of approval.
  • Reducing Your Tax Burden: If FTA doesn’t cover all penalties or interest, we’ll explore other programs, such as Offers in Compromise or installment agreements, to further reduce your debt.
  • Ensuring Compliance Moving Forward: We provide guidance on maintaining compliance to prevent future penalties and stay in good standing with the IRS.

If you’re facing penalties and aren’t sure where to start, let us take the guesswork out of the process. Contact us today for a free consultation, and let’s work together to reduce your tax burden and secure financial relief.