What is a First-Time Penalty Abatement?

A first-time penalty abatement is when the IRS forgives or lessens a tax penalty after you fail to meet an obligation under the tax law. Abatement can result in no penalty or a smaller one. This is sometimes called a First Time Abate. First-time penalty abatements may be considered by the IRS in a variety of circumstances which involve an obligation to file tax returns and to pay taxes on a timely basis. It is an important remedy among the limited range of  tax relief options the IRS offers.

Contact Ayar Tax Lawyers for more information or a free consultation. We can favorably resolve your Federal or State, personal or business tax problems – anything from unfiled tax returns to foreign bank account issues

What are the Possible Circumstances for a First-Time Penalty Abatement?

The circumstances serving as grounds for a first-time penalty abatement include:

  • Failure to file a personal tax return
  • Failure to file a partnership tax return
  • Failure to file S Corporation tax return
  • Failure to pay the tax shown on the return by the due date
  • Failure to deposit tax in the correct amount within the time frame and in the required manner
  • Failure to pay tax when the amount is not shown on the return and is not paid upon demand

How to Qualify for First-Time Abate

When you ask for a first-time abate, the IRS will consider your past and current tax compliance. For example, the agency will take into consideration whether you have timely filed your returns, whether you owe back taxes and whether you have previously incurred a similar failure to comply with a tax rule. The IRS also will weigh if, except for this one mistake, you are in compliance with your tax obligations.

Three-year Lookback

For past compliance, the IRS looks at whether you filed the same type of return (if required) for the previous three years. If you made those filings and incurred no penalties, you would receive an abatement for the current year in which you made the error. You would also receive an abatement if you received a penalty during one of the prior years and it was removed for a reason other than a First Time Abatement.

What if I have a Payment Plan?

To grant a First Time Abatement, the IRS expects a record of timely tax returns or requests for extensions of time to file. The agency also expects to learn from your tax record that you have no unresolved tax debt. You may have a payment plan with the IRS for taxes you owe and still seek a First Time Abate, so long as the payment plan concerns a different tax period.

How do I file an IRS abatement for the first time?

Typically, an application for a First Time Abate is made by calling the IRS or by writing. Contact tax lawyers for assistance in this crucial step. These IRS interactions are the most important point of contact for explaining to the IRS the life events that caused you to miss a filing deadline, rendered you unable to pay the taxes due at the time of the filing, or other circumstances that led to the penalty.

Often, supporting documentation is required. For example, a natural catastrophe such as a flood or a family emergency such as death or illness can cause taxpayers to miss deadlines or be unable to pay taxes on time. The IRS will consider such human circumstances, but they must be fully explained and substantiated.

If you already paid the penalty, you may request a refund by filing IRS Form 843. Here, too, it’s wise to seek professional advice because requesting a refund from the IRS can be more of an uphill battle than obtaining an initial abatement.

Can you use first-time penalty abatement more than once?

Yes. During a single tax period, you may seek relief more than once from a penalty related to the following types of First Time Abates:

  1. Failure to File
  2. Failure to Pay
  3. Failure to Deposit

For example, if you didn’t pay your total tax in 2021, you might get a notice from the IRS for the balance due with a penalty. You request a First Time Abate, and the IRS grants it. If you were to make only a partial payment, the IRS might impose another penalty because the tax has not been completely paid. After you complete payment in full, you could ask the IRS to consider again abating the penalty.

A First Time Abate is not a statutory right but an administrative power of the agency. Therefore, granting an abatement is always at the discretion of the IRS.

Contact Us for More Information or a Free Consultation

Our team at Ayar Law has decades of experience navigating these issues and can help level the playing field for our clients. We represent individuals and businesses dealing with large and serious tax challenges. We aggressively negotiate settlements because we have a deep knowledge of the law and will safeguard your rights as a citizen. Whether these problems are related to you, your spouse, or to the businesses you own–contact us for a free consultation.