First time penalty abatement (FTA ) is an IRS procedure under which you do not need to give any “reasonable cause ” for requesting the waiver of penalty. This administrative procedure gives a discretion to IRS to waive penalty for one year only if certain conditions are fulfilled.So, you have requested for penalty abatement for more than one year, IRS may grant only the earliest tax year that meets FTA criteria.

2.What Type of Penalties can be Waived ?

First time penalty waiver can be applied for following types of penalties only

  1. Failure-to-file tax return
  2. Failure to pay tax demands, or
  3. Failure-to-deposit penalty;

Read what type of forms qualify for FTA?

3.What are the Criteria for First Time Abatement?

  • Taxpayer must have filed (or filed a valid extension for) all required returns
  • There is no outstanding tax demands in any year.
  • No payment defaults .
  • taxpayer was not imposed any penalty except an estimated tax penalty) for the preceding three years.

4.How to apply for first time penalty abatement ?

There are various ways to You can apply for FTA online, in writing or over the phone with the IRS. . Although writing to IRS is most preferred way for application under first time abatement request ,your tax attorney or tax practitioner can call IRS and request for first time penalty abatement over phone as well. If it goes well, you may receive a letter (generally within 30 days) in the mail indicating that the penalties were removed based on FTA criteria. .

The tax payer or his/her tax practitioner may write to the IRS to request FTA You should attach all relevant information like

  1. Identification number, tax year/period, tax form, and penalty type and amount.
  2. Clearly state that you meets the FTA criteria.
  3. Attach return transcripts to prove filing/payment compliance and a clean penalty history.

5.What if penalty is already paid ?

Even if the taxpayer has already paid the penalty, law entitkes him/her to request IRS for first time penalty abatement.However, in such a case , taxpayer needs to file Form 843, Claim for Refund and Request for Abatement, to request a refund.

6.How Much Can Be Abated under FTA?

The IRS has not published any limit , but experience shows that maximum penalties that maybe waived by IRS under first time penalty abatement procedure can be $10,000.

7.What to do if IRS reject FTA request ?

The obvious step , in that case is to file Appeals wherein consideration for allowing appeal can be entirely different.

Prashant Thakur

Prashant Thakur

Prashant Thakur is a practicing tax advisor on Income Tax Act of India . He also blogs on US taxation law (IRC) . He has more than 30 years of experience in dealing with tax issues ( 20 years on the other side of the table i.e for Income Tax department) . He has written three books - Tax Evasion Through Shares( 2008 & 2012) , Taxing Question Simple Answer (2013) and Crypto Taxation in USA (2022) . Other than taxation , he has great interest in cloud technology, WordPress and is found of small tech company .
Prashant Thakur
Prashant Thakur
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