Using the First-Time Penalty Abatement Waiver, This article explores the IRS first-time penalty abatement waiver and explains how to help clients remove certain penalties using it.
12 years ago, the IRS created the first-time penalty abatement administrative waiver (FTA), which allows compliant individual and business taxpayers to request abatement, or removal, of certain penalties that the IRS has assessed against them for the first time.
Despite the advantages of this IRS waiver, few taxpayers who qualify for FTA request it, according to a 2012 report by the Treasury Inspector General for Tax Administration (TIGTA).
According to the report, the problem is twofold:
- Most taxpayers and tax professionals do not know FTA exists, and
- IRS representatives often incorrectly disallow an FTA when using the IRS’s faulty automated decision tool to make penalty determinations.
In effect, FTA is hidden to most taxpayers and tax practitioners, who may not be aware of how it works, how to request it, or even its existence. Through persistence, a practitioner can often persuade the IRS to reverse an initial incorrect determination that a taxpayer does not qualify for an FTA.