IRS’ One-Time Forgiveness Policy – How the Program Can Help Taxpayers

April 06, 2022
IRS’ One-Time Forgiveness Policy – How the Program Can Help Taxpayers

What is IRS One-Time Forgiveness?For a myriad of reasons, it’s possible to fall behind on your tax payments. Perhaps you have inadvertently overestimated your financial obligations to the IRS. Maybe you are experiencing financial hardship and are unable to pay. However, those are not valid reasons to avoid contacting an IRS representative. You should be aware of the various IRS tax relief policies. The IRS has the mandate to cumulate taxes. However, they are equally open to collaborating with taxpayers on how to best provision any pending debt. This section will go over your options for dealing with the IRS’s one-time forgiveness policy.

What is One-Time Forgiveness?


One-time forgiveness, also known as penalty abatement, is an IRS program that waives penalties imposed on taxpayers who fail to pay on time or file an incorrect income tax return. However, this program is not for you if you have many unresolved penalties or have a history of filing late.

One time-time forgiveness is at your disposal in only three ways.


First-Time Penalty Abatement


It is the primary type of relief offered by the IRS to taxpayers (both businesses and individuals) to cover first-time penalties. It’s also your opportunity to demonstrate a justifiable and logical reason for failing to pay or file on time.

Countless taxpayers who would otherwise meet the criteria for relief do not appear to be aware of this program’s existence.

If you meet all of the following criteria, the penalty abatement program may reduce or eliminate a penalty—but not your tax liability.

*  Completed and filed all your tax returns.

*  Agreed to an installment plan or paid your outstanding balance with the IRS.

*  You have not received any previous penalties in the last three years.

Paying debts before applying for relief is recommended because the failure-to-pay penalty accrues until tax is fully paid.


Reasonable Cause


If you aren’t eligible for first-time penalty abatement, you can ask the IRS to waive your fees if you have reasonable cause.

Some examples of reasonable cause include:

  1. Whether it’s a fire, a casualty, or a natural disaster.
  2. Inability to obtain records.
  3. The taxpayer’s or a member of the taxpayer’s serious illness, immediate family’s death, unavoidable absence, or incapacity.
  4. You explicitly used all judgment and reasonable business care to meet federal tax duty, but you were still unable to do so.


A lack of funds is insufficient to qualify for assistance. It’s pivotal that you have documents to back up your claims (with specific start and end dates), such as hospital records, court records, or a letter from your doctor confirming your illness.


Statutory Exception


If the IRS provided you with erroneous written advice, you might request a statutory exception. You must file a Form 843, Claim for Refund and Request for Abatement for Penalty Relief, to do so. You should include on your form your request for advice, the incorrect written advice you followed, and the number of penalties and taxes incurred due to the IRS advice.

Always be sure to have the necessary documents to back up your claim and keep all the correspondence from the IRS.

Foster Financial CPA is a certified public accountant firm serving small businesses in Phoenix, Arizona. It points them in the right direction and avoids mistakes that may keep their company stuck. For more information, contact us today.