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'First Time Abate' is useful, but not for everyone

We have noted before that the tax collector is not someone to be trifled with. When a taxpayer receives a notice of an issue regarding his or her taxes from the IRS or from the Minnesota Department of Revenue it can be disconcerting, but it is not something that can be ignored.

It's not only important to respond in a timely fashion, especially where claims of back taxes owed may be involved; the form the response takes is important, as well. You don't want to poke the tax collection bear. Rather, you want to acknowledge receipt of notice. This serves as a precursor to a more productive process of trying to work out an optimal outcome of the dispute.

What many readers may not appreciate is that the IRS does not see itself as mainly a regulator with a stick. It much prefers to take the carrot approach when apparent issues with a return are identified. For example, available in the IRS toolbox on behalf of taxpayers is a policy called "First Time Penalty Abatement."

As its title suggests, it is something that can only be used once to obtain administrative relief of any penalties that might be levied for errors made in filing. The thing is it is only available to those who meet certain eligibility requirements. You may qualify if:

  • You've never filed a return before or if you have a clean filing record for the prior three tax years
  • You can show that you are up to date on all required returns or have filed necessary forms for extensions
  • The taxes owed have been paid or you have arranged to pay them.

There may be other forms of relief available from the IRS, as well. The specific conditions of your case will determine whether any of them might be open to you or whether a more robust legal strategy might be required. Either way, consulting with an experienced attorney is recommended to be sure you understand your rights and options.

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