What Is IRS One-Time Forgiveness?

April 27, 2022
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Did you get hit with some unexpected IRS tax penalties? If you’re in a financial bind and you meet specific criteria, the IRS has options to help you. One-time forgiveness allows certain taxpayers to explain how they may have made errors in their tax filing that resulted in penalties and fees and receive forgiveness. 

The IRS will grant one-time forgiveness for taxpayers, but there are qualifications taxpayers must meet before applying. Here’s what you should know about IRS one-time forgiveness. 

What Is IRS One-Time Forgiveness?

IRS one-time forgiveness is a form of administrative relief, allowing the IRS to remove penalties and taxes for taxpayers who otherwise have been law-abiding taxpayers. 

Businesses and individuals can request one-time forgiveness. One-time forgiveness doesn’t apply to other penalties, like accuracy-related penalties.

To receive IRS one-time forgiveness, you’ll do one of three options. You can receive one-time forgiveness through a first-time penalty abatement, establish reasonable cause, or seek a statutory exception.

One-time forgiveness only applies to one tax year, so if you need multiple years of forgiveness, the relief will apply only to the earliest tax year. Penalty relief for other tax years is based on other forms of forgiveness, like reasonable cause.

3 Ways To Seek One-Time Forgiveness

First-Time Penalty Abatement

The first way to seek one-time forgiveness is through first-time penalty abatement

There are several qualifications to receive a first-time penalty abatement. You’ll qualify for relief under the First Time Penalty Abatement if:

  • You didn’t previously have to file a return, or you don’t have penalties for the three tax years before the tax year that you received a penalty.
  • You filed all currently required returns or filed an extension of time to file. 
  • Or, you have arranged to pay, or you have paid, any taxes due.

First-time penalty abatement will also have an effect on penalties. There’s a failure to pay penalty associated with failure to pay abatements, and this penalty will continue to accrue until you pay the tax in full. 

A first-time penalty abatement won’t stop interest from accruing. Interest charged on a first-time penalty abatement will be reduced or removed when the penalty is reduced or removed.

Reasonable Cause

The second way you can receive one-time forgiveness is by establishing reasonable cause. The IRS considers reasonable cause based on your circumstances and facts about your situation.

Some reasons that can qualify for reasonable cause are: 

  • Casualty, fire, natural disaster, or other disturbances.
  • Death, serious illness, incapacitation, or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family. 
  • Inability to obtain records.
  • Another reason which establishes you used all ordinary business care and prudence to meet your Federal tax obligations but were unable to do so.

If you’re seeking to receive one-time forgiveness through reasonable cause, you’ll also provide facts behind your case. There are details about your case that you’ll need to tell the IRS, such as the following:

  • Actions taken to file or pay your taxes when circumstances and facts changed
  • Circumstances and facts which prevented you from filing or paying taxes
  • Details about reasons you’re considering a reasonable cause  

To receive one-time forgiveness using reasonable cause, you’ll also need some documents. These documents include: 

  • A letter from a physician to establish illness or incapacitation, with specific start and end dates.
  • Court records or hospital records.
  • Documentation of a natural disaster or other events that prevented compliance.

With reasonable cause, interest cannot be abated. Interest will be reduced or removed when the interest is reduced or removed.

Statutory Exception

The last way to seek one-time forgiveness is to seek forgiveness because of statutory exceptions. You may consider a statutory exception if you believe you received incorrect written advice from the IRS. 

When you request relief to qualify for statutory exception, you’ll need several items:

  • The erroneous written advice you relied on from the IRS.
  • The tax adjustment report identifies the penalty or addition to tax and the item or items relating to the erroneous advice.
  • Your written request for advice.

Interest relief isn’t available for penalty relief using the statutory exception. Interest will be reduced or removed when the interest is reduced or removed.

How To Apply For One-Time Forgiveness

There are three ways you can apply for IRS one-time forgiveness. You can apply for one-time forgiveness from the IRS by:

  • Calling the IRS
  • Completing IRS Form 843
  • Submitting a written petition

The first option you can use to apply for forgiveness is to call the IRS. This option works best for taxpayers who would like forgiveness removed quickly. 

Your penalty amount may be too high for forgiveness to occur through a phone call. For taxpayers with penalty amounts too high for forgiveness through the phone, you’ll write a letter to request forgiveness. 

If the IRS grants one-time forgiveness by phone, you’ll receive a letter in the mail saying the penalties were removed. Even if the IRS grants one-time forgiveness, you may still want to write a letter confirming your phone conversation, including the:

  • Agent’s name 
  • Agent’s identification number
  • Date of phone call

The second option to apply for one-time forgiveness is to complete IRS Form 843. This form allows you to request an abatement. You’ll need to provide:

  • Basic information (name, address, and SSN) 
  • Tax fee or tax type
  • Details about your penalty 
  • Interest and penalties
  • Original return information 
  • An explanation of why you’re applying for abatement

Finally, the third option to apply for one-time forgiveness is to submit a written petition. You can write the reasons you believe you should receive one-time forgiveness. Working with an accounting professional can also be helpful to the IRS in requesting one-time forgiveness.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.