IRS may implement automatic tax penalty forgiveness program
Seventeen years ago, the IRS created a program designed to remove certain tax penalties for late payment or late filing. Individuals with no tax penalties for their previous three tax returns could be eligible. The program is called the First-Time Penalty Abatement program (FTA). This year alone, more than 1.35 million Americans could stand to benefit from it.
The problem, since the program’s inception, has been that only a fraction of the tax payers who are eligible for FTA even know about it. Many tax professionals, too, are unaware of this abatement option.
In recent years, the IRS has taken steps to raise public awareness about FTA. It set up a service that allowed individuals to request FTA by phone, no matter how high their penalty was. It also created a hotline for tax payers to call to get penalty assistance. In addition, it sent mailings to individuals subject to penalties in order to educate them about this relief option.
To date, however, these efforts have not had the desired effect. Last year, only 8 percent of the qualifying population applied for FTA.
This year, the IRS is considering a new strategy. In a press release last week, the IRS announced that it may take the responsibility off of the tax payer to seek out a qualifying relief program. Instead, if the IRS recognized that you qualified for FTA, it would automatically grant you penalty abatement for one year under this program. If this proposed plan is implemented, it would mean that 1.35 million Americans currently facing tax penalties would receive automatic relief.