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.