Something New To Me

[WhiteOleander]

Perhaps everyone except me was aware of this. Apparently as of Dec. 2009, the IRS will abate FTF, FTP, and/or FTD penalties if the taxpayer justs asks. It is the "First Time Abatement". (FTA). If the taxpayer has not had one of these penalties in the previous 3 years, the IRS will abate the current penalty. This is a once in a lifetime choice.

I knew that sometimes the penalties might be abated for reasonable cause for business entities. But, this is individual tax. And no reasonable cause is necessary.

So, it appears, if the client gets a bill that includes a great deal of penalties, we can call and get them abated if that's what the client chooses to do.

One tricky part to this according to an IRS agent, is if there is an installment plan in place, the taxpayer needs to wait until they have paid the amount of the principal. Then request the penalty abatement. If they request it at the time the installment is set in place, then only that amount of penalty is abated. The penalty will still be assesed on the remainder of the installment agreement. That seems loopy to me. If the penalty is abated, I would think it would be totally removed from any furhter calculations.

Anyone had this in their office?

[Mo Sheets]

News to me....

Thanks for the heads-up. I hadn't heard this either. Good to know since I have one client this could help!

Mo

[taxea]

WO What you have learned from them is true. Wait until the principal on the IA has been paid and then ask for the penalty abatement. They will abate the penalty because it trulu onlu applies to criminal cases not civil cases. If you research "application of penalties" you may find the IRS info.

[Black Bart]

Abatement

Perhaps everyone except me was aware of this. Apparently as of Dec. 2009, the IRS will abate FTF, FTP, and/or FTD penalties if the taxpayer justs asks. It is the "First Time Abatement". (FTA). If the taxpayer has not had one of these penalties in the previous 3 years, the IRS will abate the current penalty. This is a once in a lifetime choice...Anyone had this in their office?

I don't think it's new. I had never heard of it either but Kram Bergold clued me in on it a few years ago. It seems like around 2007 or maybe 2008 that I called IRS for a client who had reasonable cause without using the one-time ticket. Told agent we wanted to save that for future use, but she would only offer the one-time deal (said "Do you want it or not?"). It was client's last year to file, so we did it her way and they killed the penalties.

[WhiteOleander]

This may not be new. But, when a preparer in one of our offices called the IRS recently, the agent offered the abatement. This has happened on two separate cases. It is not just available to criminal cases. There did not have to be reasonable cause.

I got the info from Internal Revenue Manual
20.1.1.3.6.1 (12-11-2009)

One of the taxpayers it was denied to couldn't get the abatement because they had a penalty in 2008. Therefore, the agent said they could not abate the 2009 penalty.