The most complicated part of requesting FTA is determining whether you qualify. Here’s what you need to know.
- FTA applies only to certain penalties and certain returns.
- For individual taxpayers, FTA is available for two of the most common penalties: failure to file and failure to pay
- For business and payroll taxpayers, FTA applies to the failure to file, failure to pay and/or the failure to deposit penalties. S corporation and partnership late-filing penalties also qualify for FTA.
- Estate and gift tax returns don’t qualify for first-time IRS Penalty Abatement.
FTA doesn’t apply to the estimated tax and accuracy penalties. Accuracy penalties are based on the specific facts and circumstances for each person or business and each tax year or period. However, similar to the spirit of FTA, accuracy penalty responses often carry more weight with the IRS if you have a proven track record of filing accurate returns on time and you made a good-faith effort to file accurately
- To qualify for first-time IRS Penalty Abatement, you must meet the clean compliance criteria rules.
You must have a clean three-year penalty history. To qualify for FTA, you can’t have any penalties of a “significant” amount in the past three years on the same type of tax return. The IRS doesn’t publicly define significant amount, but, in practice, the IRS has considered penalty amounts of $1 or more as significant. The estimated tax penalty is an exception and wouldn’t disqualify you from receiving FTA. Prior penalties that the IRS abated for cause also don’t disqualify you from FTA.