One-time Penalty Abatement

First Time Penalty Abatement

Whether it was an intentional action or simply an innocent oversight due to ignorance, the IRS will not hold back when it comes to penalty assessment. These extra fees will often be significant amounts and they actually provide the IRS with funds in the billions of dollars every year. In fact, The IRS assessed a staggering $37.3 billion in civil penalties in FY 2021. It is no wonder the agency is merciless in their assessments and collection processes.

So what can you do if you are facing tax penalties? There’s actually some good news. For certain failure to file and failure to pay penalties and the failure to deposit penalty (employment tax), the IRS accepts a “First-time Penalty Abatement” defense. Dallo Law Group has used this defense for a number of our clients with huge success and saved them thousands of dollars in penalty assessments. If you feel that you may be a candidate for such an abatement, reach out to us for assistance and we will examine your circumstance.

Criteria For Qualifying For First Time Penalty Abatement

In order to qualify for this abatement you must satisfy three basic requirements:

  • First, you must have not incurred penalties or any penalty abatements for the prior three tax years. Bear in mind, this criterion does not include the penalties you may have received for underpayment of tax estimates; they do not count.
  • Second, you have filed all your returns and extensions in a timely fashion; therefore, you have been compliant. Do not bother applying for a first time penalty abatement if you happen to have outstanding paperwork.
  • Third, if you have outstanding taxes, you have made orderly payment arrangements. In other words, even if you have an tax bill that is due with the IRS, you are in good standing with it.

California Tax Payers

The IRS establishment of the one time tax abatement changed things somewhat for the California tax payer. Namely, now there can be similar relief for these residents. However, reaching a successful abatement agreement with the Franchise Tax Board (FTB) requires good information and careful preparation. There are six recognized circumstances under which the FTB will consider penalty abatement. All have their own specific rules and requirements which must be met in full when applying for abatement.

  • Financial Hardship

  • Erroneous Refund

  • Reliance on Formal Written Advice

  • Disaster Loss

  • Military Personnel

  • FTB/IRS Delay or Error.

As with most agencies involved in collecting taxes, a taxpayer who makes a reasonable cause case can likely be successful if justifying circumstances were present that created things to spiral out of control. The details will certainly determine the final decision of the FTB and if leniency will be granted. It is also good to note that the chances are great if the IRS has granted an abatement that the FTB will more than likely do that too.

An Opportunity Not To Be Missed

It is certainly draining and confusing dealing with an outstanding tax bill; but that is no reason to not take advantage of the opportunity of eliminating your tax penalties. Dallo Law Group has in-depth knowledge of the IRS first time penalty abatement as well as the FTB’s penalty abatement.

Although both have similarities, there are some differences between the two. Namely, for California, it is a once in a lifetime abatement that can be granted. Another difference between the two is for the FTB, the abatement is only available for personal income taxes, not business. Finally, for California, it is applicable to requests for abatement made for taxable years beginning on or after January 1, 2022.

We at Dallo Law Group have tremendous pride in assisting our clients through tax advocacy and consulting. We can help you seek and win a first time tax abatement whether it is for the IRS or FTB or both. Many people do not even know about this offer. There is no reason you should not pursue it if you have the requirements necessary to move forward. Our team can help you through the process. Call Dallo Law Group for a free consultation where we can explain the details and what to expect at each step.