Request First Time Penalty Abatement

The IRS has all sorts of penalties.  There is up to 25% penalty for filing a tax return late.  There is up to 25% penalty for paying taxes owed late.  For payroll taxes, there is up to 15% penalty for not paying deposits timely.  By the time the IRS gets done charging penalties your tax could double!  If you made a one-time mistake, you may qualify for removal of all penalties charged. 

What is First Time Penalty Abatement?

The IRS may grant a one-time waiver of all penalties charged for any one year or period.  This program is called First Time Penalty Abatement.  To qualify for the First Time Penalty Abatement program, you must have filed and paid all taxes on-time for three years prior to the tax year with the problem.

For example, a taxpayer mistakenly filed 2013 taxes late.  The IRS charged the taxpayer $7,500 in penalties for filing and paying the taxes late.  The taxpayer never had a tax issue with the IRS before.  The taxpayer filed and paid all taxes on time for years 2010, 2011, and 2012.  The taxpayer qualifies for the First Time Penalty Abatement program because everything was filed and paid on time for three years prior to 2013.  A request can be made to remove the $7,500 of penalties charged.

Request penalty removal for any year

The First Time Penalty Abatement program works for any year.  If the problem year is 2008, you can still request the First Time Abatement.  The IRS will grant a waiver of all penalties charged for 2008 if all taxes were filed and paid on time for three years prior to 2008: 2005, 2006, and 2007.  There is one issue to consider when requesting First Time Penalty for an older tax year.  If waiving all penalties results in a tax refund, you may not be eligible to receive the refund for tax years older than three years.

What if you owe tax penalties for more than one year?

The First Time Penalty Abatement can be requested if there were penalties charged for several years.  The IRS will grant the penalty waiver for the earliest year with taxes owed.  For example, a taxpayer filed tax returns for years 2010, 2011, 2012, 2013, and 2014.  The IRS charged penalties for each year due to filing the tax returns late.  The taxpayer can request First Time Penalty Abatement for 2010.  The IRS will grant the penalty waiver if everything was filed and paid on time for three years prior to 2010: 2007, 2008, and 2009.  The IRS will not grant a penalty waiver under the First Time Penalty Abatement program for years 2011, 2012, 2013, or 2014.