NY Tax Lawyer- IRS First-Time Abatement

IRS First-Time Abatement

The IRS First-Time Abatement Policy can be a very useful tool to lower an outstanding tax bill. It is most helpful when someone made a one-time mistake (late filing of return, late payment of tax, etc.) and the IRS penalized the taxpayer for this lateness.

If you have filed all of your tax returns, and have made arrangements (such as an installment agreement) to pay whatever tax is owed, you can ask the IRS to abate the penalty charged under the tax law policy called the IRS First-Time Penalty Abatement policy. This policy was implemented to help taxpayers who have a clean history of tax compliance (the IRS looks at the last three years), and to promote future compliance by working with the taxpayer by offering them this one-time opportunity. The IRS will not offer to remove the penalties when you speak to them about how to pay the tax, so it must be specifically asked for by the taxpayer (or his representative attorney).

This policy does not require reasonable cause (see Form 843) so it is simple and quick to request. However, the relief is not available for some penalties (Form 706- Estates), but it is generally available. Also, it is best to ask for the penalty relief when it will do the most good, and a tax attorney can tell you that.

If your track record is not clean, you can still request penalty relief by showing reasonable cause for the late filing or late payment. A showing of “reasonable cause” will require proving that the taxpayer exercised “ordinary business care and prudence” in trying to satisfy their tax obligations (filing and paying), but nevertheless failed to comply with the tax laws because of some specific circumstance. As you might imagine, this is not easy and that is why the IRS First-Time Abatement Policy is so helpful. It is important to consult with a tax lawyer to learn more about your options for penalty relief.