Nearly a million and a half
Americans missed out on $181 million in tax-penalty relief because the Internal Revenue Service (IRS) failed to inform them about a possible waiver.
Under the tax code, penalties can be
assessed for not filing a tax return or for failing to pay the full amount
shown. But Americans who have paid on time and in full for the previous three
years can ask for the penalties to be waived.
The problem is that the IRS did not
bother to tell 1.45 million tax filers in 2010 about this opportunity, known as
the First-Time Abate. The reason for this waiver, according to the IRS, is to
reward past tax compliance and promote future tax compliance.
J. Russell George, the Treasury
Inspector General for Tax Administration (TIGTA), whose office discovered the
IRS failure, said in a statement: “Penalty waivers should not be granted only
to taxpayers or preparers with knowledge of IRS processes.”
“If the IRS does not administer
these and other penalties fairly and accurately, taxpayers’ confidence in the
tax system will be jeopardized,” George added.
The TIGTA recommended that the
First-Time Abate waiver would be better used as a compliance tool if the IRS
ensured that taxpayers were aware of the potential to receive the waiver based
on their past compliance history, while making receipt of the waiver contingent
upon taxpayers paying their current liabilities.
The IRS actually agreed with the
recommendations and said its officials are currently taking appropriate
corrective actions.
“We will continue to review our
policies for the application of First-Time Abate and reasonable cause to
determine the best ways to assist taxpayers with their federal tax payment
obligations. This includes ensuring appropriate communication to taxpayers,”
said Faris R. Fink, commissioner of the IRS’s Small Business/Self-Employed
Division.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
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