The FTA Waiver of Tax Penalties

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On behalf of Silver Tax Group posted in IRS Tax Audits on Tuesday, February 20, 2018.

For close to 17 years, the IRS has had a program in place allowing for penalty abatements. These abatements are available for individuals with a history of complying with reporting requirements.

The policy behind the first-time penalty abatement program (FTA) was to give taxpayers a break who are in trouble with the IRS for the very first time. However, many taxpayers appear unaware that such an FTA waiver even exists.

Growing awareness of the FTA waiver

Every year, over a million taxpayers fail to take advantage of the FTA waiver. As of 2012, only about eight percent of taxpayers applied for this tax penalty relief.

In response to such a low response, the IRS tried to expand upon accessibility to this program. This includes accepting such requests by telephone. The IRS will now accept FTA requests over the telephone regardless of the size of the penalty amount owed. The IRS also has put in place a hotline helping taxpayers understand their options when it comes to the FTA.

Working towards voluntary compliance

Apparently some taxpayer advocate groups are striving towards additional expansion on programs such as the FTA. They wish for the IRS to look for further ways to encourage voluntary compliance on the part of taxpayers.

One particular option would be to provide an automatic FTA. This would entail automatic abatement of penalties with taxpayers with three or more straight years of reporting compliance.

The FTA waiver has its complexities and will not come into play in all circumstances, however. It will not apply for penalties related to estimated tax or regarding accuracy errors. And arguments in favor of abatement still require some reasonable basis.

Michigan taxpayers may find it helpful to speak to a seasoned tax attorney to see if they are eligible for certain abatements of penalties. In all communications with the IRS, it is essential to provide valid legal arguments that will not get you into further hot water with the agency.

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