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How to Waive Your Penalties with the IRS Using the First-Time Penalty Abatment

Reduce Your IRS Penalties – First-Time Penalty Abatement Waiver

Has the IRS charged you with a penalty relating to filing or paying your taxes? Have you always been compliant with the IRS in past years? If the answer is yes to both of these questions, than there may be a way for you to get your IRS penalty reduced or abated.

The First-Time Penalty Abatement Waiver (FTA) was created 13 years ago by the IRS to help administer the consistent and fair abatement of penalties, reward past compliance, and promote future compliance. The FTA can be used by first-time non-compliant taxpayers for any single tax period in which certain penalties have been assessed.

Although the First-Time Abatement was first introduced in 2001, many individuals and businesses are not aware of its existence and do not make use of it. In 2010, over 90% of individuals that would have qualified for the abatement did not receive the waiver because they did not file for it. THE IRS WILL NOT TELL YOU ABOUT IT UNLESS YOU ASK!

For individuals, an FTA may be requested for failure-to-file and failure-to-pay penalties. For businesses, an FTA may be requested for failure-to-file, failure-to-pay, and failure-to-deposit penalties. In order to qualify for a First-Time Penalty Abatement, an individual or business must meet the three clean compliance criteria. These criteria are as follows:

1. Filing Compliance:

The taxpayer must have filed all currently required returns and they must not have an outstanding request from the IRS for an unfiled return.

2. Payment Compliance:

The taxpayer must have paid, or arranged to pay, any tax that is due.

3. A 3-year Clean Penalty History:

The taxpayer cannot have had penalties of a “significant” amount assessed in the prior three years on the same tax return. (In practice, any penalty is a significant amount)

If you have had a filing or payment penalty assessed against you, and you believe that you meet the preceding three criteria, you may be eligible for the first-time abatement waiver. In this case, you should contact a tax professional that can confirm that you qualify, and if so, further point you in the right direction.

In 2010, the average failure-to-pay abatement was $84, and the average failure-to-file abatement was $240. At Max Tax Agency, we will be glad to help you determine if you qualify for the first-time abatement waiver. If you have any concerns about any penalties that the IRS has assessed against you, we are here to answer your questions.

Hiring a Tax Preparer

How do you decide between preparing your own taxes and paying someone to do it for you? Well many times if your return is simple enough it makes sense to prepare it yourself. However the tax law is very complicated and many deductions are often overlooked so it often is a good idea to have an expert look into it. Finding the right tax preparer is very important. Once you find a good tax preparer you will use them for life!

Why go to a tax preparer? The National Society of Accountants listed 10 good reasons why.

10. It takes the hassle out of doing it yourself.

9. You don’t have to keep up with the many tax law changes or understand complicated tax law.

8. Making mistakes can be very costly.

7. Your time is worth money – add up the hours you would spend doing it yourself and calculate what that’s worth.

6. A tax program in a box cannot represent you in an audit.

5. A tax professional can answer your questions to help you make smarter tax-saving decisions.

4. A tax professional can help you plan all year and for future years.

3. A tax professional can recommend ways to save on taxes

2. It gives you peace of mind knowing that a professional is taking care of it.

And the number-one reason you should hire a tax preparer is:

1. It can save you money – if your tax preparer finds even one significant deduction or tax credit you may have missed, it can easily exceed the average $246 fee it costs to have a professional prepare your return.

However finding the right tax preparer can be tricky at times. With all the tax scamming going on today there are things you should look for when choosing a tax preparer to file your taxes:

1. Are they offering to prepare your taxes with your last paystub?
• If they use your last paystub often times some of the numbers differ from the numbers on your W-2 which could cause your refund to be delayed for weeks and an amendment may need to be filed. A professional tax preparer will explain this to you.

2. Are they accessible?
• Make sure you can contact them even after the end of tax season. Some preparers disappear offseason so if you need to retrieve any tax forms from them you will be in a difficult situation. Make sure your tax preparer is available for help, questions, and to retrieve information from year round.

3. Do they sign your return and show their credentials?
• Every tax preparer should have a Preparer Tax Identification Number issued by the IRS. Every prepared return should include it with the tax preparers information.

4. Do they promote how much of a tax refund they can get you per child?
• If the tax preparer has promotional material with promises of a dollar amount per child chances are they do a lot of Earned Income Credit Scamming and they are not a professional tax preparation company. It is illegal to advertise like that according to the IRS. They try and lure customers in with promising thousands of dollars and often times claim false deductions without the customer knowing which later will often result in an audit.

Hiring a tax professional is important because the tax law is very complicated and you do not want to overlook deductions and strategies to save money on your taxes, but just make sure you hire the right one!