Eligibility for IRS First Time Penalty Abatement (FTA), Do You Qualify?

The First Time Penalty Abatement (FTA), Qualifying for Relief

The First Time Penalty Abatement (FTA)

When a person has been assessed penalties for a failure-to-file or failure-to-pay pay their IRS tax liability, they may be able to avoid penalties if they qualify for the first time penalty abatement (FTA). Not everyone Taxpayer who has been assessed an IRS penalty will qualify for the abatement One important aspect of this FTA penalty abatement procedure to keep in mind is that it does not apply to many types of penalties or taxpayers find themselves on the receiving end of, such as international information reporting assessed penalties for violations of the FBAR, FATCA, Form 5471 or Form 3520-A (“assessable penalties“). Let’s go through some of the basics of the first-time penalty abatement and how taxpayers may qualify for relief.

First Time Penalty Abatement (FTA)

The IRS summarizes the FTA as follows:

• • • The IRS may provide administrative relief from a penalty that would otherwise be applicable under its First Time Penalty Abatement

    • You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service’s First Time Penalty Abatement policy if the following are true:

      • You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.

      • You filed all currently required returns or filed an extension of time to file.

      • You have paid, or arranged to pay, any tax due.

The Failure-to-Pay Penalty 

The failure-to pay-penalty will continue to accrue, until the tax is paid in full. It may be to your advantage to wait until you fully pay the tax due prior to requesting penalty relief under the Service’s first time penalty abatement policy.

Other Administrative Relief

If you received incorrect oral advice from the IRS, you may qualify for administrative relief.

Internal Revenue Manual 20.1 et. seq.

As provided by the Internal Revenue Manual:

• IRS provides administrative relief from the following penalties if the qualifying criteria contained in this subsection are met:

• • • Failure to file (FTF) penalty under IRC 6651(a)(1), IRC 6698(a)(1), or IRC 6699(a)(1),

    • Failure to pay (FTP) penalty under IRC 6651(a)(2) and/or IRC 6651(a)(3), and

    • Failure to deposit (FTD) penalty under IRC 6656.

• This administrative waiver, implemented in 2001, is referred to as First Time Abate (FTA) and is available for penalty relief the first time a taxpayer is subject to one or more of the referenced penalties for a single return.

• However, even when FTA criteria outlined in paragraphs (4)-(6) have otherwise been met, do not provide penalty relief under the FTA waiver unless the following are also true:

  • • The taxpayer has filed, or filed a valid extension for, all required returns currently due, AND

    • The taxpayer has paid, or arranged to pay, any tax currently due.

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