Penalty Abatement for First Time Offenders

Are you stuck with an IRS debt and don’t know what to do? Take a look at your situation and determine if you qualify for a penalty abatement, it’s the easiest way to go about eliminating or reducing your debt. If this is the first time you’ve had issues with the IRS, you can easily overcome your debt and even shave of a few thousand dollars in the process.

First off, the IRS’s first-time abatement or (FTA) penalty waiver is available to all taxpayers but is often never requested because it’s not advertised. It allows first-time noncompliant taxpayers the ability to request an abatement of penalties for a single tax period. You may request an FTA of a failure to pay or failure to file penalty. If you are a business owner, you can request an FTA of the penalties for a failure to deposit payroll taxes.

You might also qualify for an abatement under other circumstances which the IRS considers reasonable cause. Some of the conditions stipulated as reasonable cause are as follows:

• Erroneous Written Advice from the IRS. If the IRS has sent written advice to you regarding your taxes or how to file for certain circumstance and this advice has lead you to incurring debt, they must relieve you of all penalties and allow you the opportunity to set up an Installment Agreement for the principle or pay off the debt in full.

• Erroneous Oral Advice from the IRS. If you received advice from an IRS agent during a conversation, the IRS must abate any portion of the debt attributed to the erroneous oral advice provided. In order to qualify for this type of abatement, you must prove:

1. You exercised ordinary care and prudence in relying on that advice.

2.There was a clear relationship between the situation, the advice provided, and the penalties that were assessed.

3. You had a clear tax history prior to the current issue.

4. The IRS did not send out correct information via other avenues such as written documents or electronic correspondence.

5. Is there any supporting documentation? The following are examples of supporting documents:
a) A notation to the taxpayer’s (you) inquiry to the IRS.

b) Documentation regarding the advice provided by the IRS.

c) Information regarding the office and method by which the advice was obtained.

d) The date the advice was provided.

e) The name of the IRS agent who provided the information.

• Erroneous Advice from a Tax Advisor. Your reliance on a tax advisor for advice generally falls under the reasonable cause exception for the accuracy related penalty under IRC 662. You may however be denied an abatement under certain circumstances. Penalty relief based on reliance of a tax advisor is very limited, usually only situations that are considered complicated or technical, so it is always suggested if you have any specific questions regarding technicalities, to contact an IRS agent about it. Due to the fact that the IRS can only provide penalty relief under the criteria for erroneous advice from an advisor, it is also recommended to pursue an abatement by meeting reasonable cause standards.

• Fire, Casualty, Natural Disaster, Official Disaster Area, or Other Disturbance. If you have been victim of any type of disaster or have been subject to an official disaster area, the IRS may provide extensions for filing or even abate the penalties.

• Correction of Service Error. An IRS error could be any error the IRS has made during computing and assessing tax, or crediting accounts. If an analyst from the IRS identifies a computer programming application that has caused a penalty to be assessed in error, they will contact the appropriate parties. If you have become a victim of this type of error, you may file for a penalty abatement in much the same manner as if you were filing for an Erroneous Assessment or Erroneous Written/Oral Advice.

Requesting information for a penalty abatement may seem like a daunting task but tax attorneys and professionals are available to assist you in this venture.

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