The tax lawyers at Nardone Law Group routinely advise and assist taxpayers in Ohio and throughout the United States with making arrangements to reduce or eliminate their federal tax liabilities owed to the Internal Revenue Service (the “IRS”). One area of particular interest to taxpayers is the IRS’s first time penalty abatement policy. If you or your business has unpaid federal tax liabilities, you may have received a notice from an IRS revenue officer. Revenue officers are employees within the IRS who focus on collecting unpaid federal tax liabilities. The primary function of the IRS revenue officer is to collect federal taxes that have been reported or assessed but not paid, and to secure returns that have not been filed. There are collection alternatives available, however, to taxpayers that may resolve their delinquent federal tax liabilities and stop IRS levy action, including: (i) an installment agreement; (ii) currently not collectible status; (iii) bankruptcy; (iv) paying in full; (v) an offer-in-compromise, and (iv) challenging the underlying tax liability. A request for abatement of penalties is one of several ways to challenge the underlying tax liability.
Request for Abatement of Penalties Based upon First-Time Abate Policy
The IRS’s first-time abate policy, or “First Bite” policy, under I.R.M. 188.8.131.52.6.1 is an administrative waiver, and does not carry any dollar threshold, enabling taxpayers to seek this first time abatement for substantial penalty amounts. It is important to note, however, that this First Bite abatement may only be applied to one single form and tax period. The First Bite policy states that individuals or businesses may seek this venue for alternative penalty relief if they are a first time “offender” with relation to federal tax liabilities. An individual or entity may qualify for abatement of penalties under the First-time Abate policy if: (i) the taxpayer has not previously been required to file a return, and has no prior penalties, for the proceeding 3 years; and (ii) the taxpayer has filed, or filed a valid extension for, all currently required returns, and paid, or arranged to pay, any tax due.
The second criterion requiring taxpayers to be current on their tax filings was recently added to the First Bite policy, and requires that the taxpayer be up to date on all federal return filings and payments, including estimated federal tax deposits through the IRS’s Estimated Federal Tax Payment System (“EFTPS”). If the taxpayer is currently enrolled in an installment agreement with the IRS, and is current on their related monthly installment payments, then the taxpayer will be deemed current on their tax payments for those periods.
NLG COMMENT: As tax attorneys specializing in representing individuals and businesses in front of the Internal Revenue Service, it is important to fully understand all options available to taxpayers, so that the taxpayers can avail themselves of those options, including abatement of penalties. The Service provides us these opportunities and tolls, and we have to ensure that we use them.
Contact Nardone Law Group
Nardone Law Group represents businesses and individuals in federal and state tax issues, including offers in compromise and installment agreements. If you would like to enter into an offer-in-compromise or an installment agreement with federal and state taxing authorities, you should contact an experienced tax attorney today. Nardone Law Group’s tax lawyers and professionals have vast experience representing clients before federal and state taxing authorities. Our experienced tax lawyers will thoroughly review your case to determine what options and alternatives are available, including applying and entering into an offer-in-compromise or installment agreement. Contact us today for a consultation to discuss your case.