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The First-Time Abatement Policy—Harsh Realities And Strategic Considerations

By Garrett L. Brodeur
ABA Tax Times
May 2022 Issue

First-Time Abatement

The IRS implemented a first-time abatement (FTA) policy in 2001 to provide relief from penalties in a single year for failure to file, failure to pay, or failure to deposit under certain circumstances. The data suggest that the FTA policy has been either unnoticed or underutilized among eligible taxpayers. Further, the National Taxpayer Advocate has criticized the policy for failing to fulfill its purpose. Today, however, the effects of the COVID-19 pandemic and administrative delays within the IRS have given the FTA policy greater significance.

To qualify for relief under the FTA policy, a taxpayer must generally show three things: filing compliance, payment compliance and a clean penalty history. Specifically, taxpayers must show that they (i) were not required to file a return or have no prior penalties for the preceding three years; (ii) have timely filed (or filed a valid extension) for all currently required returns; and (iii) have paid or arranged to pay any tax currently due.

These bright-line criteria for relief are both clear and easily understood, but they also can lead to harsh and seemingly unfair results in certain situations. A recent district court decision from the District of Maryland illustrates the harsh realities of the FTA policy and provides an opportunity to revisit a few practical takeaways to consider when requesting FTA relief.


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Published with permission from ABA Tax Times © 2022.