What Is One-Time Forgiveness from the IRS?

If you’re struggling with tax debt, you may have heard or seen the radio, TV, internet, and other ads that promote something called one-time forgiveness for taxes. These ads make it sound like there’s a special program you can apply for to ask the IRS to forgive your tax bill if you are in good standing otherwise, but that’s not the whole story.

Like much of the language tax services companies use, the phrase “one-time forgiveness” is misleading. The one-time program the IRS actually offers is called first-time penalty abatement, and it doesn’t necessarily help you cover your tax debt. The IRS also offers tax relief programs that may be able to help you reduce your balance if you meet strict criteria.

Find out what one-time forgiveness means, who is eligible for first-time penalty abatement, and other tax relief options from the IRS.

What Is the IRS One-Time Forgiveness Program?

Many people mistakenly believe the IRS could forgive their tax debt if they’ve never violated any laws before. However, tax forgiveness is just the language that companies use to try to get you in the door to use their tax relief services. It’s a marketing tactic to get you to contact them, and then they’ll explain your real tax relief options. They use the phrase “one-time” to build urgency and make you think it’s a limited-time offer.

In actuality, the IRS offers something called first-time penalty abatement, which service providers may equate to the one-time forgiveness they’re promoting. Make sure you always ask upfront exactly what a company’s promotional language is referring to.

First-time penalty abatement is not related to the full tax debt you owe. It is an abatement of tax penalties that your account has incurred because of issues like late return filing or late payment. IRS tax forgiveness language may also refer to the IRS’s collection of options to reduce or eliminate your back taxes. In the following section, we’ll look at all of these programs.

Who Qualifies for First-Time Penalty Abatement?

So, can everyone request first-time penalty abatement? You can apply only if you meet the IRS’s eligibility requirements:

• You must have a history of good tax compliance — this means that in the last three years, you must have filed on time and were not issued any penalty assessments in that period.
• You have either paid your tax bill in full or have set up an arrangement to pay it, such as a payment plan.
• Your current tax returns are filed or under an extension.

Keep in mind that there are cases when the IRS will allow penalty relief for reasonable cause. This requires showing the IRS that there was a good reason that you didn’t file your return on time, such as a death or a natural disaster that prevented you from accessing or sharing documents.

How Much Will the IRS Waive with Penalty Abatement?

There is no standard amount the IRS will waive if you’re approved for first-time penalty abatement. Every taxpayer’s situation is different, and tax balances vary widely. In some situations, the IRS may waive the full penalty. In others, they may only reduce the penalty.

If you’re not sure what to do when you receive an IRS penalty, work with a tax professional who can help you understand your rights and options under the tax law.

How to Request First-Time Penalty Abatement

The process is pretty straightforward for requesting first-time penalty abatement. First, pay close attention to all details provided on your notice of the penalty assessment. In some cases, you can call a phone number to request abatement if you have a history of strong tax compliance.

You can also complete and send in IRS Form 843, Claim for Refund and Request for Abatement. This form can be used to claim tax refunds or request penalty abatement. Ask a tax professional which option would be best for your situation.

Sometimes, the IRS will grant you penalty abatement without an application from you. After they send you a penalty notice, they may look over your records and tax history, and then send out another notice that they’re allowing abatement. You can also call them on the phone to request penalty relief.

What If the IRS Rejects My Penalty Abatement Request?

The IRS could also deny your request for first-time penalty abatement. You typically have 30 days to then request a hearing, which initiates the appeals process. In an appeal, you may be able to get your penalties waived or reduced if you can show the IRS that you have reasonable cause for filing your taxes late.

Going the appeal route isn’t always easy. Carefully follow the instructions provided on your initial penalty notice to start the process. You’ll be much better off working with a tax attorney or other tax professional who can guide you through everything and ensure you get the best outcome possible.

Other IRS Tax Relief Options

The IRS offers a collection of tax relief options to meet a range of different taxpayer needs and challenges. Be cautious in terms of these options too when you hear an ad promoting tax debt relief or the Fresh Start Program. These terms really just refer to the IRS’s collection of assistance programs you can request or apply for. 

Here are those IRS tax relief options:

Currently Not Collectible (CNC)

This is a status you can request when you’re going through a financial hardship and paying your tax bill isn’t possible. The IRS may ask you to send in proof of your financial situation. CNC is only a temporary pause on IRS collections, so you may have to start paying when your finances improve. However, the IRS has 10 years to collect your debt following the tax assessment, so it’s possible that your debt would be “forgiven” if you’re in CNC status until the debt expires.

Partial Payment Installment Agreement (PPIA)

A PPIA is a form of installment agreement where you will attempt to pay off your debt over the agreed-upon period. With this agreement, however, if you still have a balance at the end of the statute of limitations period, which is 10 years after the tax assessment, you won’t be on the hook for that remaining amount any longer.

Offer in Compromise (OIC)

If you’re dealing with financial troubles, you can try an OIC. This is when you send in an offer to the IRS to settle your debt, showing them that the amount you offer is all you can afford to pay. If they accept, you won’t have to pay part of your original tax bill. This method is really only available to those taxpayers who don’t have the means to pay the tax amount owed by the collection statute of limitations and it is highly unlikely that their financial situation will improve. You must display that you are currently living at or below the allowable financial standards set by the IRS.

Payment Plan

With a standard payment plan — or installment agreement — you technically still have to pay off everything you owe. However, you can do it over a longer period of time instead of having to pay all at once when it’s due. You must have filed the relevant tax returns to qualify. You can apply for a long-term payment plan online if you owe $50,000 or less. If you owe more, you generally need to file a form to apply along with a financial disclosure. 

Innocent Spouse Relief

For married couples who file jointly, you could get something called innocent spouse relief. If your spouse underreported their taxes on your joint tax return, and you weren’t aware of this understatement, you could apply for innocent spouse relief. This allows you to avoid having a liability for additional taxes owed outside of your own income taxes.

Tax Return Filing Extension

You can avoid the failure to file penalty by requesting a tax return filing extension. This gives you another six months to get your tax return in. However, it doesn’t extend the time you have to pay your taxes. So, you’ll still have to make a payment if you owe money by the original deadline.

Find an Expert for One-Time Tax Forgiveness Assistance

If you’ve been hit with a penalty from the IRS, there are options. You can apply for first-time penalty abatement if you have a good tax compliance history over the last few years and haven’t received any other penalties in that time. You may also be able to appeal a penalty or rejection of penalty abatement if you can show reasonable cause.

If you can’t pay your tax balance, you have additional relief options such as applying for a PPIA, sending an OIC, or requesting CNC status. These routes could lead to the IRS dismissing part or all of your tax balance in the long run.

Whatever your tax issue may be, seek help from a tax expert right away. The team at Damiens Law is ready to help you determine the best way forward. We help with IRS negotiations, exploring tax relief options, navigating the appeals process, and much more. 

Get in touch with Damiens Law to set up a consultation about your tax issue.

FAQs about One-Time Forgiveness from the IRS

Do I qualify for one-time tax forgiveness?

The IRS requires most people to pay their tax debt in full. Most taxpayers qualify to set up a payment plan. However, if you’re dealing with a financial hardship or cannot reasonably pay your tax bill, the IRS will typically work with you and may be willing to forgive some of your tax debt.

Can I ask for tax debt forgiveness from the IRS?

The IRS does not have one forgiveness program you can apply for and see your tax bill forgiven. However, if you’re struggling to pay, you could apply for an installment agreement, offer in compromise, PPIA, currently not collectible status, or first-time penalty abatement. Some of those programs include a tax forgiveness element.

What if I can’t afford to pay a tax penalty?

Consider your tax compliance history. If you have paid on time in the last three years and have filed the same type of tax return as this year, you could qualify for first-time penalty abatement. You also cannot have any other penalties during that time. You may be able to get penalty abatement if you have a reasonable cause to present to the IRS regarding late payment or filing.

Is there a minimum amount that can be forgiven?

The IRS doesn’t have a minimum forgiveness amount. Rather, it’s based on your financial situation. For example, someone who owes $100k or more may qualify to settle for just a few hundred dollars if that is all they can afford to pay. In contrast, someone who owes $10,000 or less may be required to pay in full if their financial situation indicates they can afford full payment.

Is there interest on tax penalties?

Yes, interest accrues on your outstanding tax balance and any penalties on that balance. This is why you want to get everything paid off as soon as possible, so you don’t continue to see your bill increase. Some penalty abatement approvals will also reduce or remove interest.

Can I apply for one-time forgiveness from 2022 taxes?

The IRS will outline a timeline for responding to a penalty notice, which is usually 60 days. You usually have three years from the return due date or filing date to file Form 843 to request a refund or abatement. However, talk to a tax professional about your situation to understand your options for unpaid tax solutions.

Can I only be approved for first-time penalty abatement one time?

When considering your request for penalty abatement, the IRS only looks at the last three years of your tax filings to ensure you filed and paid on time and that you didn’t get any other penalties. 

Can my tax debt be forgiven under the IRS Fresh Start Program?

Similar to one-time forgiveness language, companies may use the term IRS Fresh Start to promote a program you can apply to get tax relief. However, this isn’t really one program you can apply to. It represents all of the IRS’s tax relief options, many of which will not lead to complete tax debt forgiveness.