TIGTA Discovers IRS Did Not Tell Qualified Taxpayers About Penalty Waivers
TIGTA, Ref. No. 2012-40-113
The IRS failed to inform approximately 1.45 million taxpayers that they qualified for relief from failure to file (FTF) and failure to pay (FTP) penalties, the Treasury Inspector General for Tax Administration (TIGTA) recently reported. The IRS collected some $181 million in penalties from taxpayers who could have had their penalties waived under the First-Time Abate program.
Taxpayers who do not file their return by the due date may have to pay a FTF penalty. The FTF is generally five percent for each month or part of a month that a return is late, but not more than 25 percent. The penalty is based on the tax not paid by the due date (without regard to extensions). If a taxpayer files his or her return more than 60 days after the due date, the minimum penalty is $100 or, if less, 100 percent of the tax on the return.
The IRS also may impose a FTP penalty of 1/2 of one percent of the unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. The FTP increases to one percent per month for any tax that remains unpaid the day after a demand for immediate payment is issued, or 10 days after notice of intent to levy certain assets is issued.
TIGTA reported that the IRS, beginning in 2001, has waived the FTF and FTP penalties for qualified taxpayers under the First Time Abate program. Penalty relief is generally granted to taxpayers who receive an FTF or FTP penalty but who have a compliant tax history for the prior three years, TIGTA explained.
Not all taxpayers with compliant tax histories have received first-time penalty abatement, TIGTA discovered. According to TIGTA, approximately 1.45 million qualified taxpayers were not told about the First-Time Abate program. TIGTA reported that more than two-thirds of these eligible taxpayers owed FTP penalties.