Basic Guide to the First-Time Penalty Abatement

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Everything You Need to Know About the First-Time Penalty Abatement

The IRS can seem merciless at times, but the agency actually provides numerous opportunities for struggling taxpayers to make amends.

The first-time penalty abatement (FTA), in particular, is designed to give well-meaning taxpayers a second chance. This opportunity is often neglected by eligible taxpayers, who have no idea it exists or struggle to understand how it works. To resolve this problem, we’ve explained the basics of the FTA program below:

What Is the Purpose of the First-Time Penalty Abatement?

While late fees and other penalties help the IRS keep taxpayers in line, the agency sometimes uses metaphorical “carrots” for encouragement, alongside the “sticks” meant to penalize delinquent taxpayers. The first-time penalty abatement is one of the most noteworthy forms of positive reinforcement, as it rewards taxpayers for maintaining a clean history.

Individuals who fail to file, deposit, or pay their taxes on time may be able to avoid penalties by using the FTA as a get-out-of-jail-free card. This reflects the agency’s stance that everybody is entitled to at least one mistake.

Who Is Eligible for the FTA Program?

A strong history of filing and paying taxes on time is essential for obtaining the first-time penalty abatement. This means no IRS penalties within the past three years. The rare exception may be granted for penalties involving estimated taxes.

In addition to maintaining a positive background with the IRS, taxpayers who hope to use the first-time penalty abatement must be current on their latest tax return. This also means paying tax obligations or making arrangements to do so via installments.

Interested in taking advantage of the first-time penalty abatement? At the Highland Tax Group, we can provide guidance to help you make the most of this and other opportunities for minimizing your tax burden. Reach out today to discuss your options.