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Penalty relief? IRS won't offer it

Thursday, October 18th, 2012

IRS penalty relief worth $181 million was available to 1.45 million taxpayers who were not told by the IRS and did not receive the relief. A new report from the IRS watchdog Treasury Inspector General for Tax Administration recommends changes to penalty abatement procedures to encourage taxpayers to file and pay taxes.

The Tax Code imposes penalties on those taxpayers who file their returns or pay their taxes after the due date. For taxpayers who have properly filed and paid taxes for the prior three years, the IRS has a procedure called “First-Time Abate” (FTA) under which late-filing or late-payment penalties may be waived. The catch? The taxpayer must ask for the abatement. The IRS does not offer the waiver, and most taxpayers are unaware that it is available.

Other penalty relief issues and recommendations were also discussed in the TIGTA report. IRS officials agreed with the recommendations in the report. It plans to review the current process for application of the FTA waiver, along with application of the reasonable cause standard for penalty abatement.

If you received a notice from the IRS assessing penalties, consider all factors including your past record of compliance. You may qualify for penalty relief under the First-Time Abate or other provisions in the Tax Code.

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