“First Time Abatement” can be a powerful tool in reducing a taxpayer’s liabilities to the IRS. Penalties the IRS charge for filing and paying taxes late are substantial. While interest accrues on an IRS liability, just like any other loan balance, it’s common for us to see an older liability more than double over time (due to the penalties for late filing and penalties for late payment of the tax due on returns).
An important step in reducing total amounts owed to the IRS can be looking at possibilities for penalty abatement. If someone has “reasonable cause” for filing or paying late, they can request that the IRS abate the penalties that have been charged.
Requesting penalty abatement can be a great solution in some situations, but the IRS sets a very high bar for what constitutes reasonable cause; usually medical illness or injury, where one can prove to the IRS that there was no way they could have filed and paid their taxes on time.
First Time Abatement
Another easier option for requesting penalty abatement is known as “First Time Abatement.” If a taxpayer has a completely clean compliance history (no problems or penalties charged for the three years prior to the year in question) the IRS generally can abate the penalties for the first tax year someone falls off track. We’ve saved our clients thousands of dollars using this approach, so please give us a call if this seems like something that may benefit you!