First the bad news: There is a penalty if you fail to file your tax return on time. There is also a penalty if you don’t pay your tax in full.
Now the good news: The IRS will cancel out that penalty if you have been in compliance for the three years prior to the problem and, if you ask for it.
The IRS has recently had their hand slapped for failing to tell taxpayers about this penalty relief, commonly known as the First-Time Abate.
In act, a recent report says that approximately $1.4 million taxpayers with over $181 million in penalties could have had them abated, if they had just asked.
The IRS agrees with the finding of the report and also agrees with the recommendations to improve their response. They are now studying the best way to use the First-Time Abate waiver as a compliance tool.
Remember the First-Time Abate waiver is just that – a first-time benefit. You won’t get to take a waiver like this more than once, so make sure you’re properly using it at the right time.
If you feel you qualify for a First-Time Abate waiver, first make sure that you know the full amount of the penalties. They must all be calculated to get the full benefit of the abatement. Once you get a waiver, you can’t get another one.