Understanding First Time Abatement

Many people are unaware of the IRS’ first-time abatement penalty waiver. Adding to the confusion is the fact that there have been recent developments in terms of how it applies this policy.

The changes to the policy’s execution were outlined in the Office of the Chief Counsel Memorandum, which was just recently released. This memorandum outlines how the FTA process will become automated, among other important changes.   

Automation

As mentioned, one of the major changes that the IRS is making is automating the FTA process.

In the past, the only way to receive an FTA was to affirmatively request one and to provide reasonable cause for the request. The new policy allows all taxpayers who meet FTA requirements to automatically get their wavier, thereby making this option much simpler to obtain for taxpayers who meet the requirements. This change would also allow people who many not even know about the wavier to take advantage of it.

The IRS plans to achieve this goal by simply suppressing all eligible penalties in the taxpayer’s file when it is found that the taxpayer meets the requirements for eligibility for an FTA. If all goes according to plan, the IRS estimates that this move will take waivers from the 350,000 released each year to a whopping 1.7 million per year.

Feelings on this proposed automation process are mixed, with some thinking it’s a great thing for taxpayers and others having concerns.

The best way to determine how you feel about it is to determine if and how it will affect you. Speaking with a qualified tax professional can help you to better understand automation and other changes and what you need to do to ensure that, if these changes affect you at all, they affect you in the most positive way possible.