Failure to file, failure to pay, or failure to deposit penalties may be waived if it’s your first offense with the IRS. First-time penalty abatement is a program taxpayers may qualify for which waives penalties for certain infractions that can be abated:

• The FTA program often goes unused simply because taxpayers are unaware of its existence.

The IRS isn’t going to waive penalties and significant taxes owed for just anyone; there are strict guidelines in order to qualify. To get approval, you will need to prove to the IRS that there is reasonable cause for filing or paying late.

Reasons for qualification include:

• Emergencies, like natural disasters, medical expenses, and other unforeseen events
• If the IRS made a mistake on your return or delayed your return
• If the IRS gave you bad advice that led to penalties and if you have this advice in writing

According to IRS policy on first-time penalty abatement, if you’ve always paid your taxes on time and are otherwise in good standing with the IRS, then you may qualify for the FTA program. Even if you’ve answered yes to the following questions, your penalty abatement request may still go through.

• You’ve had a penalty assessed more than three years prior to the tax year with the present penalty
• You had an estimated tax penalty assessed in the past three years
• You’ve received reasonable-cause relief from penalties in the past
• You received an FTA more than three years prior to the tax year with the present penalty

If it’s not about your first time, the following are what the IRS will typically check.

The following returns qualify for FTA relief:

• Income tax returns
  • Form 1040 series, U.S. Individual Income Tax Return
  • Form 1041, U.S. Income Tax Return for Estates and Trusts
  • Form 1065, U.S. Return of Partnership Income
  • Form 1120, U.S. Corporation Income Tax Return
  • Form 1120S, S. Income Tax Return for an S Corporation
• Employment tax returns
  • Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
  • Form 941, Employer’s Quarterly Federal Tax Return
  • Form 943, Employer’s Annual Tax Return for Agricultural Employees
  • Form 944, Employer’s Annual Federal Tax Return
  • Form 945, Annual Return of Withheld Federal Income Tax
• Excise tax returns
  • Form 720, Quarterly Federal Excise Tax Return
  • Form 2290, Heavy Highway Vehicle Use Tax Return

The following returns do not qualify for FTA relief:

• Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return
• Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return
• Form 990 Series, Return of Organization Exempt from Income Tax
• Form 1096/1099, Annual Summary and Transmittal of U.S. Information Returns (regarding failure to file information statements, such as Forms 1099, W-2G and 1098)
• Form W-3/W-2, Transmittal of Wage and Tax Statements (regarding failure to file Forms W-2)
• Form 5500 Series, Annual Return/Report of Employee Benefit Plan
• Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, and Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business (and other international information returns)

Taxpayers may request relief from failure-to-file, failure-to-pay, and failure-to-deposit penalties in three different ways.

Depending on the circumstances and the situation, here are the methods by which you may apply for penalty relief and abatement:

• Before the IRS assigns a penalty, you may be able to preemptively prevent them from doing so.
  • You should file a penalty non-assertion request with a paper return to request that the IRS does not automatically assess a penalty.
• If the IRS has already assigned you a penalty, you may request a penalty abatement retroactively.
  • Simply send a letter (with the help of a tax professional) or call the IRS directly.
• Even if you’ve already paid your penalty, you’re still eligible to file for a penalty abatement.
  • Using Form 843 (claim for a refund and request of abatement), you must file a claim within three years of the return due date or filing date, or within two years of the date, the penalty was paid.
  • Form 843 may also be used for trust fund recovery penalty abatements as well.

While you can apply for an abatement without the help of a tax professional abatement services, it’s not suggested. A qualified tax professional will provide you with the information you need to be successful in your IRS penalty abatement.

If you want an understanding of what the IRS is looking for, you may send a sample penalty abatement letter. The letter should explain why your offense and provide evidence and examples as to why you deserve an IRS first-time penalty abatement. However, if you plan on sending a sample letter to the IRS for informational purposes, you are much better off calling or seeking the advice of a professional tax representative.

Before applying, it’s vital to talk to an IRS representative or a tax professional. A taxpayer representative may call the IRS Practitioner Priority Service (PPS) line to request a penalty abatement on behalf of their client—speeding up and simplifying the process. If the thought of taking on the IRS by yourself is too daunting, you can sign a simple power of attorney document and allow a tax representative to handle all ofr your dealings with the IRS for you.

If you do qualify, a tax professional has the skills, knowledge, and resources to make sure that your FTA application is as successful as possible. If you feel that the IRS has assigned penalties to your taxes or returns that you deem unfair, call Community Tax today.