All You Need to Know About the IRS First-Time Penalty Abatement FTA Waiver

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As a responsible taxpayer, you make every effort to file your return on time and pay any taxes owed. On occasion, however, life gets in the way. It’s only natural to fear the worst, but you might be able to avoid harsh penalties from the IRS. The first-time penalty abatement (FTA) waiver could be your key tool during this difficult time.

What Is the FTA Waiver?

In 2001, the IRS launched the first-time penalty abatement program in hopes of rewarding good taxpaying behavior while also granting a second chance to those who make the occasional mistake. This waiver essentially provides a ‘get out of jail free’ card to those with a strong taxpaying history. Taxpayers can use the waiver to avoid penalties involving:

  • Failure to file
  • Failure to pay
  • Failure to deposit

Who Qualifies for the FTA Waiver?

The FTA waiver is not nearly as restrictive as most people think. To qualify, you must meet the following conditions:

  • You have not received any significant penalties during the three years prior to your current penalty
  • You have either filed currently required returns or sought an extension to file
  • You have paid your tax bill or made arrangements for paying any taxes owed

When assessing whether you’ve had tax penalties in the past few years, keep in mind that estimated tax penalties do not play a role in FTA waiver eligibility. With other penalties, the IRS fails to explicitly define ‘significant’ — but amounts as low as $1 have prevented some taxpayers from receiving the waiver.

If you’re considering the FTA waiver as an option for your tax situation, don’t hesitate to seek feedback from the Highland Tax Group. Our knowledgeable team can offer in-depth insight into your options for resolving your tax situation.