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Criteria for Qualifying for a First-Time Tax Abatement

by | 12-9-2019 | Tax Relief

The first-time tax abatement penalty waiver was introduced as a way to avoid penalties that accrued on during a specific tax year because of either failure-to-pay, failure-to-file, or failure-to-deposit penalties. The waiver was established over ten years ago, but most taxpayers don’t know that they can use the form to remove penalties that may have been added on to one of their tax years.

The form might help you reverse penalties that were applied to your tax balance if you meet one of the following criteria:

Filing your tax return late or not filing your tax at all

Tax season is easily one of the most stressful times of the year. The dread of possibly owing money to the IRS can intimidate many taxpayers so much that they avoid filing their tax returns. Each tax year that is filed late or not filed at all automatically gets extra penalties tacked on by the IRS for failure to file. The penalty is 5% of the balance each month, according to the IRS.

Failing to pay on time or failing to make estimated tax payments

If you still owe more money after you file your tax return, the IRS will expect it to be paid off by the tax deadline.

For 1099 earners, it’s advised very strongly that you make estimated payments to the IRS throughout the year in order to make sure you don’t owe a balance after filing your taxes. See 1099 forms here.

If you don’t back what you owe in full, make estimated payments, or work out an agreement with the IRS before the deadline, the IRS will start placing penalties and interest on top of your balance until the amount owed is paid 100%.

Failure to deposit certain taxes as required

Employers are the ones who are responsible for withholding taxes from employees’ paychecks. If the employer fails to remit the amount to the U.S. Treasury, the IRS will add a failure to deposit penalty.

The IRS sends a letter to each business with employees and explains the federal tax deposit schedule to ensure that the business knows how frequently they are required to make federal tax deposits.

If an employer does not make the payments as scheduled, by the requested timeline, or in the correct amount, the IRS will assess a federal tax deposit penalty.

It is safe to believe that most taxpayers won’t want to pay their taxes with extra penalties and interest that may have accrued, and that is why the IRS introduced the First Time Penalty Tax Abatement.

In order to qualify, the IRS often requires you have been penalty-free for the past three years, have filed all of your tax returns on time or an extension, and have negotiated payment arrangements for any debt still owed to the IRS. Taxpayers can ask for this form from the IRS, or they can visit the IRS website to download the electronic version of the form.