New client told me that in 2013, he filed his 1040 late and was unable to pay his amount due, and as a result, set up an installment agreement. The preparer that prepared the 1040 did not request a first time penalty abatement for that tax year. It appears that the client could have been eligible to receive the FTA has the request been made. Unless I misunderstood, I think I read or heard recently that a FTA can be requested for past years, and if the client qualified at that time, could request a refund of penalties paid during the term of the installment agreement. Curious if any preparers on this forum can respond to this and comment on any experience with this topic.
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See the 2015 Mar-Apr edition of the EA Journal (NAEA member publication) for an article "IRS First Time Abatements Made E-Z". The article includes a lot of helpful details, including trancodes on transcripts, how to get transcripts for older years, and other advice from someone who has done a lot of them. The IRS IRM also includes a lot of info you may want to review.
"Ask for First Time Abatement for a specific tax year. POA must have authorization on the selected FTA Year and the 2848 must also include the prior THREE years. Practitioner must identify the FTA Year as the IRS assistor will not “go fishing” to find an FTA Opportunity.
Some IRS personal are not familiar with the process and will tell you the penalty is too old or does not qualify for some other reason. You can either try to escalate to a supervisor or just call back and get someone else who understands FTA.
You should have your answer immediately. The IRS Assistor will tell you during the call if the FTA is granted. If approved the taxpayer will receive an IRS Letter 3503C in the mail. Taxpayers may also benefit from the reduction of interest charged on the penalties. ""You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
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