If someone owes money to the Internal Revenue Service (IRS), that’s something they need to deal with sooner rather than later. As with many debts, it will only grow because interest and penalties will get attached to it and accumulate with time – potentially adding thousands of dollars to the balance due.
If someone makes an honest mistake and underpays their taxes or maybe even neglects to pay them on time, they may be able to get some relief from the IRS if this is a first-time occurrence.
The FTA program
The IRS has a program called First-Time Penalty Abatement (FTA). It’s often referred to as “one-time forgiveness.” It lets people who have previously paid their taxes as required to pay their overdue taxes without having to pay three key penalties for failing to file, pay and deposit. The failure-to-file penalty can be particularly steep – going up to 25% of the unpaid balance if multiple months go by.
The unpaid balance is still due, along with any interest that accrues. By not being charged these penalties, however, taxpayers can more easily get caught up on what they owe.
To qualify for the FTA program, a taxpayer must meet the following requirements:
- They must have filed their previous tax returns on time or received an extension.
- They cannot have had an outstanding balance from any prior years unless they have a payment plan approved by the IRS.
- They cannot have had penalties for the three years prior to the year for which their taxes are due.
A taxpayer who doesn’t meet these requirements may still be able to get the penalties removed for “reasonable cause.” This can include things like a natural disaster in their area (for example, a destructive tornado or flood) or a serious illness that prevented them from filing their taxes on time.
As noted, tax debt doesn’t just magically disappear. Although it may seem like the IRS is a mammoth bureaucratic entity, tax debt doesn’t just get lost or forgotten about. Whatever the circumstances, it’s smart for taxpayers who are notified that they owe the IRS money to get experienced legal guidance as early as possible accordingly.