If you haven’t paid your IRS tax debt you may be able to avoid paying penalty charges by speaking to us at Defense Tax about getting a First Time penalty Abatement (FTA) from the IRS.

Tax Day passed on the 15 April and for those who usually make all their tax payments on time it can be a bit of a nervous time if you can’t pay your tax on time. Subject to certain conditions you may get your tax penalty charge waived. Let’s look at this in a bit of depth.

Conditions an FTA is authorized  

There are four circumstances under which the IRS should automatically offer an FTA. That’s right – automatically as the circumstances for getting an FTA are absolute. It does mean you have to be honest and have managed to pay your taxes up until now, unless there have been reasonable circumstances.

The US Journal of Accountancy explains the circumstances under which you can avoid an FTA:

“Had a penalty evaluated more than 3 tax years before the tax return in question.” This means you have been up to date with the IRS for the last three years.

The Journal continued, “Had an estimated tax penalty evaluated in the past 3 years.” According to the IRS website, this means: “If you did not pay sufficient tax the entire year, either through withholding or by making estimated tax payments, you might have to pay a penalty for underpayment of estimated tax.”

Personal Income Tax

The Journal of Accountancy again: “Received reasonable-cause relief from penalties in the past.” This may have been an Offer in Compromise (OIC) where you could not make your full tax payments. The IRS explains those circumstances it deems ‘reasonable cause’:

  • Reasons that establish that you utilized every ordinary business care & prudence in order to meet your Federal tax obligations but were incapable of doing so nevertheless”
  • Incapacitation, serious illness, death or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family
  • Inability to obtain records
  • “natural disaster, casualty, fire or other disturbances

Finance website Nerd Wallet points out that in these circumstances the paperwork will be a big job: “You will have to provide documentation like court statements, hospital records or other evidence that supports your claim.” In this instance, you really should bring in tax experts like Defense Tax to argue your case.

The Journal of Accountancy deals with other circumstances under which an FTA can be offered to you too. Where you “received an FTA more than three tax years prior to the tax return in question,” you could also qualify.

The final qualification is where you have “penalties on subsequent tax years.” This essentially means that you are negotiating with the IRS over a block of delinquent tax repayments and you would get an FTA on Year One but not necessarily subsequent years.

A final note is that the FTA only covers charges but not penalty interest. The IRS doesn’t charge double digit interest – this is going to be milder than a delinquent credit card bill for example.

How do you get an FTA?

Your best move would be to call Defense Tax to discuss your tax debt at the outset. We offer a free consultation to discuss your entire tax problem and from there you can choose to work with us, or in extremely black-and-white, low-figure cases we may advise you to get in contact with the IRS yourself. We usually offer FTA negotiations as part of a bigger tax debt relief package to help you through your problems as a whole.

While in simpler circumstances the FTA is an absolute yes or no, there is an appeals process too. Nerd Wallet suggests, “In case the IRS denies your request for first-time penalty abatement but still, you think you qualify, you can make an appeal to the decision.” The finance website suggests you go for ‘reasonable cause’ – an OIC – but these are very difficult to qualify for.

Nerd Wallet again: “if you incurred a tax penalty just because you made a mistake or did not know the rules, that route may not be for you”. Essentially that means you need to be extremely clear about your situation in wanting the FTA – really that is a matter for experts like us.

Call Defense Tax today!

FTAs and other penalties can be reversed where your tax debt case is in the hands of experts. We would normally help you get a repayment package together to help you walk away clean and serene from your bruising tax debt experience. That can only be a good reason to call Defense Tax today at 1-866-657-1040!

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