Getting a First Time Abatement (If You Need One)
June 21 2019
After nearly two decades working with taxpayers from all walks of life to represent them in all aspects of their taxpaying life, we’ve learned that even the most punctual, organized person in the world can forget to file or miss a tax deadline. Seriously. So, we figured it was time we discussed the first time abatement.
Look, we know we’re tax geeks and that puts us in rare company. Most people really despise doing taxes, and sometimes they put the process off for so long they miss a deadline. Folks start working for themselves or make other life changes that lead to a missed payment. Or, sometimes clients just don’t realize how much in taxes they’ll owe, so they end up with a tax bill they can’t afford!
We’re experts at handling these problems, but we don’t think it’s fair that most people who aren’t tax specialists have little to no idea how to get started! So, we’ve decided we won’t hog the knowledge.
Before you give us a call and enlist us to help you deal with the IRS, it’s a smart idea to read up. For example, did you know the IRS offers a waiver that can help you clear out some of the penalties you may have accidentally accrued during the year?
They totally do.
Say Hello to the First Time Penalty Abatement
First time meeting? We’re not surprised.
The First Time Penalty Abatement has actually been around for a while, but most taxpayers have no idea it exists. Unfortunate, since it’s one of the most effective tools for easily erasing certain penalties.
1. Failure to File
Missing the deadline for filing your tax return, or failing to file your taxes completely, are two of the most common causes for penalties.
Tax season is stressful, but as soon as you miss the deadline—or the extension deadline—the IRS will start laying on the penalties. Now, the penalty is based off your tax bill— so if you owe $0 or you’re expecting a refund, then your penalties will also be $0. But if you owe the IRS at tax time, your balance will start accumulating penalties (5% per month).
With a first-time abatement, you may be able to secure forgiveness on some of those penalties from the IRS.
2. Failure to Pay
Whether you made a withholding mistake or you typically work on 1099 contracts, it’s very common to owe the IRS a balance.
However, when you don’t pay the balance on time, you start building up penalties—turning your tax bill into serious tax debt. Left unchecked for a long time, even a relatively small tax bill can get seriously out of control and sink you into the kind of debt you may have difficulty climbing out of.
Fortunately, the first-time penalty abatement can help you nip your tax penalties in the bud before they bloom into something truly scary.
3. Failure to Deposit
As a small business owner, you’re tasked with withholding taxes from employee paychecks and making those deposits to the IRS. If you fail to do this, the IRS can hit you with a penalty.
This is obviously less common than a failure to pay or failure to file penalty, but it can be far more damaging in the short-term. Your penalties can stack up much faster, simply because one missed deposit might total hundreds or thousands of dollars across all of your employees, permanently stunting the growth of your business. Side note: This is one reason we offer payroll and bookkeeping services.
With a first-time penalty abatement waiver, you might be able to get rid of some of those penalties your business has accrued.
How to Qualify for First Time Penalty Abatement
If a first time penalty abatement is on the table for your tax situation, you should definitely consider using it. The IRS writes that you may qualify if:
- You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
- You filed all currently required returns or filed an extension of time to file.
- You’ve paid, or arranged to pay, any tax due.
If you qualify, your penalties will be removed, as well as the interest charged on those penalties. What a lifesaver!
Abatement and You
Mistakes happen, but the one mistake you should never make is letting your tax penalties spin out of control.
You know what a first time penalty waiver is, so now it’s time to take the next step. Learn more. You can visit the IRS’s website or give us a call. From penalties to preparation, we’re a full-service tax representation firm for a reason: Because we will do whatever it takes to get you back on track.
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