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When time slips away: First-time penalty abatement an option

Being a business owner may involve time warps. When business is good the days fly and there is never enough time to complete everything. When a busy season coincides with tax season, the filing deadline can slip by without you having a chance to get your personal or business return completed.

As we approach the filing deadline, an extension is an option if you know you won’t have time. But if some time has passed, you need to take care of the problem or the next step in the collection process is a lien or levy.

Past mistakes

If you filed for an extension last year and weren’t able to complete taxes by the October deadline, you have probably been assessed penalties. Automatic penalties for missing a filing deadline or a payment can quickly increase the balance due.

A little-known IRS provision may provide some help. The IRS recognizes that anyone can make a mistake and offers “first-time penalty abatement” is some cases. Could you qualify?

Two basic requirements

This administrative waiver might lower your outstanding tax obligation if you meet these criteria:

  • File required returns or seek a valid extension
  • Make arrangements to pay tax due (with an installment agreement) or pay all taxes owed

As you would guess by the name of the waiver, this relief is generally only available once. The IRS will not consider a request if you made a similar one within the last three years. An exception applies for reasonable cause relief that might have been granted after extenuating circumstances (i.e. natural disaster or serious illness that affects you ability to obtain records).

If you haven’t filed all required returns or paid past due taxes, you will need to think strategically. Meeting with a tax attorney is the best way to find out if you might be able to ask for this relief and what is needed to get to the root of your tax problems.


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Frost & Associates, Attorneys at Law
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