The IRS will abate (eliminate) your penalties in many situations. Though it isn’t the only way to eliminate tax penalties, the IRS does have a First Time Penalty Abatement Program. You’ll be eligible for this abatement if:
- 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, and
- You filed all currently required returns or filed an extension of time to file, and
- You have paid, or arranged to pay, any tax due.
The First Time Penalty Abatement Program only stops the Failure to File penalty. The Failure to Pay penalty continues to accrue. For this reason, it’s often best to wait until you’ve paid off the underlying tax liability before applying for the First Time Penalty Abatement program. That may not sound as good, but it is. It only takes the Failure to File penalty five months to reach 25% of your total tax liability. But it takes the Failure to Pay penalty 50 months to reach 25% of your total tax liability.
Penalty abatement is often a good solution to pair with installment agreements. Call me today to see what we can do for you.