First Time Abatement (FTA) of late filing penalty

Technical topics regarding tax preparation.
#1
RightOn  
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I have a client who was not aware of the filing requirement of a newly established Scorp. When he came to me for tax service, the due date has passed already

Now he has received the IRS penalty notice. I plan to draft the letter for him to request for the first time abatement. What is the IRC code number of the First Time Abatement? I would like to put the IRC code number in the letter to hopefully make the request more convincing.

Thank you.
 

#2
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It's not in the IRC (other than a generic authorization by Congress for the IRS to grant penalty relief when appropriate).

It's in the Internal Revenue Manual 20.1.1.3.3.2.1
https://www.irs.gov/irm/part20/irm_20-0 ... 1452348912

You can read through that section to see how the IRS processes these requests. They do it all the time; no need to cite the authority for it. You may want to assert the facts that show that they qualify (like they haven't previously had that sort of penalty assessed before, etc.), but the IRS will check that out on their own anyway.

So don't sweat it - just make the request, and you'll be fine.
 

#3
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This is the letter that I send for first time filers and it has worked 100% of the time:

We received the attached notice assessing a penalty for late filing of Form 1120-S for 20xx. This was the initial tax return filed for this entity which was formed in 20xx.

Because the taxpayer has not previously incurred any penalties, under the First-Time Abate Program, we respectfully request a one-time waiver for late filing penalties assessed against their 20xx tax return.

If you need any further information from my office, please don’t hesitate to contact me. This information is provided under the authority granted by the Third Party Designee indication on the originally filed tax return.



This is the letter that I send for existing filers filing a late return for the first time and it has worked 100% of the time:

Because the taxpayer has been tax compliant for the past three (3) years, under the First-Time Abate Program, we respectfully request a one-time waiver for late filing penalties assessed against their 20xx tax return.

If you need any further information from my office, please don’t hesitate to contact me. This information is provided under the authority granted by the Third Party Designee indication on the originally filed tax return.


With the TPD we don't even need a POA...never been a problem.
 

#4
RightOn  
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Thank you breadenjv and Nightsnorkeler. You guys are really helpful.
 

#5
EADave  
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You can also call PPS, business line, and request the FTA. The agent will take the request, but if you don’t have a POA on file or with you at the time of the call, the agent will not provide you with the result of the request. They will simply mail a letter to the client. You can tell your client to expect a letter in about 3 to 6 weeks with the IRS’s answer. I was able to get two of these knocked out in a 45 minute phone call a few weeks ago….if you can get the IRS to answer the phone!
 

#6
K-Man22  
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It doesn't sound like you need it if the FTA will work but as a backup the rules for late filing the S election are very liberal/taxpayer friendly. Here's a link to the details:
https://www.irs.gov/businesses/small-bu ... ion-relief

I mention this backup plan because we had a new business client come to us with the same situation as yours. We tried the FTA first but the IRS denied it because the company had other compliance violations in recent years.
 

#7
sjrcpa  
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I think OP is asking about the penalty for late filing of the 1120S and not a late S election.
 


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