IRS First-Time Penalty Abatement: What It Is, How to Apply for Relief
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The IRS assesses billions in tax penalties each year, but not everyone knows the agency is sometimes willing to change its mind and reverse certain tax penalties.
The first-time penalty abatement allows certain taxpayers to remove a penalty from their record or get a refund for one they already paid.
Which penalties qualify for first-time penalty abatement?
There are generally three types of penalties that the IRS considers for abatement: failure to file, failure to pay and failure to deposit.
The failure-to-file penalty is a fee that the IRS imposes when you owe taxes and your return was not filed by the deadline (that’s mid-April for most people who didn’t file for an extension).
The failure-to-pay penalty is levied when you don’t pay your tax bill on time. The agency can apply both the late-payment and late-filing penalties at the same time if applicable, but if that happens the late-filing penalty gets reduced.
The failure-to-deposit penalty, on the other hand, doesn’t apply to individual taxpayers. Instead, it’s a penalty that employers can face if they don’t turn in the taxes they are withholding on employees' paychecks to the IRS on time.
According to the agency, if you’re eligible for first-time abatement, your claim will be considered regardless of the size of your penalty.
How to qualify for a first-time penalty abatement
If you meet two criteria, you might be able to get the IRS to reverse the penalties for not filing a tax return or paying on time.
You must have filed a tax return for at least three years prior to when you got a penalty if you were required to.
You must be in good compliance, which means you can’t have received another penalty over the last three years (or if you did, it must have been removed for reasons other than first-time abatement).
You don’t necessarily have to have paid your outstanding tax bill in full to apply for first-time abatement — but keep in mind that the IRS will continue to apply the failure-to-pay penalty from the date your abatement request onward until your debt is fully paid off.
The rules for reducing failure-to-deposit penalties can be more complex. See the IRS Penalty Handbook for more details.
How to apply for penalty abatement
You can ask for first-time penalty abatement by calling or mailing a form to the IRS.
Requesting first-time abatement by phone. If you go the phone route, you might get an answer right away, but be sure to get the agent’s name and number, and then follow up with a written letter. Already received an official IRS notice about your penalty? There will likely be a number on the upper right-hand side of the letter that you can call.
» MORE: Other IRS phone numbers to know
Requesting first-time abatement with Form 843. If you’d rather request abatement by mail, or if you've already paid a penalty and now realize you might be able to get your money back, you’ll want to file IRS Form 843. There, you’ll tell the IRS which penalty you want removed or refunded and why.
If there's interest that accrues from the failure-to-pay penalty or the failure-to-file penalty that's owed, the associated interest will get reduced or abated as well if your penalty relief is approved.
Be persistent
If the IRS denies your request for first-time penalty abatement but you still think you qualify, you can appeal the decision. You typically have to file the appeal within 30 days of the IRS' rejection. Publication 4576 has more information about the appeals process.
See if you qualify for other types of penalty relief
If it turns out that you don’t qualify for first-time penalty abatement, you might want to see if you qualify for penalty relief due to reasonable cause. However, if you incurred a tax penalty because you didn’t know the rules or made a mistake, you likely won’t qualify.
Penalty relief due to reasonable cause is typically only an option for people who have experienced deaths in the family, house fires, medical trauma, natural disasters or other dire situations. You’ll need to provide documentation such as hospital records, court statements or other evidence that supports your claim.
Know when to get help
You’re not required to hire someone to request a first-time penalty abatement for you. If you’re not sure whether you’ve paid any penalties or don’t know how much you owe, you don’t have to pay someone to get that either: You can get your account information from the IRS for free by requesting a tax transcript. You may also be able to get information on your amount due by creating an account on the IRS website.
If you need extra help or are confused about the process, a tax pro can help you sort through your options.
