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Key Takeaway

The IRS does not routinely grant requests for penalty abatement, but if you have been tax compliant for more than than three years you can get relief via the FTA program, or better still, you may be able to prove reasonable cause to if a situation beyond your control led to non-compliance (i.e. loss of a job, illness, loss of home, spouse left thus a reduction in income)

Fact Sheet: IRS Penalty Abatement

When a taxpayer disputes interest and penalties that have been assessed by the IRS, the IRS may remove the penalties and interest under the IRS Penalty Abatement program. Some or all of the penalties may be removed if the individual filing for penalty abatement can prove one of the following reasons: 1)reasonable cause; 2) mistake by the IRS; or 3) administrative waiver (FTA) first time abate.

Filing a Penalty Abatement Request

If taxpayers meet the criteria for penalty abatement, they will have to complete and submit several documents to the IRS to prove that they meet requirements. The taxpayer has three ways to plead their case with the IRS: verbal, written, or via IRS form 843. Regardless of which method is used, taxpayers will have to provide good detail and background on why the taxes weren't paid.

Understanding the First Time Abatement (FTA) Program

To provide penalty relief to taxpayers who have otherwise been compliant for more than three years, the IRS created the First Time Abate (FTA) program. While this program has been in place since 2001, taxpayers aren't always aware of, or informed of, this relief provision. For example, the Treasury Inspector General for Tax Administration reports that the IRS failed to inform 1.45 million taxpayers that they were eligible for this relief. This oversight resulted in the IRS collecting $181 million in penalties that might have been waived.

In Communicating With the IRS for Penalty Abatement

  1. Call the phone number on the letter that assessed the penalty
  2. You will likely be asked to write a letter explaining the situation/request
  3. Request an "abatement" due to reasonable cause or via the First Time Abate provision
  4. If requesting relief through reasonable cause, clearly state your case for being non-compliant
  5. If you are able to prove reasonable cause, do not use the FTA option as this can be exercised in a future year if you are a compliant taxpayer
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If you choose, your case can be mediated on your behalf with the IRS to arrive at the best possible IRS concessions
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Listen to the stories of people just like you and how they overcame their back taxes.
I found out I had a tax lien of $250,000 from taxes that I hadn't filed..."
—Richard, VA
"...Because of some difficult family problems and a divorce and some financial issues...I did not file my income properly..."
—Paul, NJ
"...we had gotten a letter from the IRS basically threatening to levy against our property and it's scary..."
—Sharon, OH
For immediate assistance with an IRS tax matter call , or request online.
We understand IRS issues are stressful and complicated. Just answer a few questions online to help us find the best course of action for you. If you prefer you may call toll-free .
Get your free case review by Tax Analysts, Tax Attorneys,
       and even ex-IRS agents by calling .
Compare your tax relief options and benefits and
       decide what's best.
Upon your approval, your case can be mediated with
       the IRS
to arrive at the best possible IRS resolution.
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