Glossary

First-Time Abatement (FTA)

First-Time Abatement (FTA) is a penalty relief program offered by the IRS that allows taxpayers to remove certain penalties if they have a clean compliance history. FTA applies to penalties for:

Failure to File.
Failure to Pay.
Failure to Deposit.

Taxpayers can qualify for FTA if:

They have not been penalized in the past three years.
All required tax returns have been filed.
Any outstanding tax debt has been paid or an installment agreement is in place.

Taxpayers can request FTA by calling the IRS or submitting a formal written request. If approved, the penalties will be abated, reducing the taxpayer’s liability. FTA is designed to reward taxpayers who generally comply with tax laws but may have made a one-time mistake.

Recommendation

Letter 2273C: Installment Agreement Accepted – Terms Explained

IRS Letter 2273C notifies taxpayers that their installment agreement request has been approved and outlines the repayment terms.

CP504A Notice

IRS CP504A warns taxpayers that the IRS intends to levy their state tax refund to collect unpaid federal tax debt.

IRS Form 656: Offer in Compromise

IRS Form 656 is used to apply for an Offer in Compromise, allowing taxpayers to settle their IRS tax debt for less than what they owe.

IRS Notice CP504: Final Notice Before Levy

IRS Notice CP504 is a final warning before the IRS levies your assets for unpaid taxes.

IRS Audit

An IRS audit is a review of a taxpayer’s financial records and tax return to ensure compliance with tax laws, often triggered by errors or inconsistencies.

Statute of Limitations on Tax Debt

The statute of limitations on tax debt is the time limit during which the IRS can collect unpaid taxes, usually 10 years from the date of assessment.

Tax Deduction

A tax deduction reduces a taxpayer’s taxable income, thereby lowering their overall tax liability.

IRS Form 8862: Information to Claim Earned Income Credit After Disallowance

IRS Form 8862 allows taxpayers to reclaim the Earned Income Tax Credit (EITC) after it was previously disallowed by the IRS.

Tax Resolution

Tax resolution is the process of resolving tax debt with the IRS, using methods like payment plans, penalty abatement, or Offers in Compromise.

Dependent Exemption

The dependent exemption allowed taxpayers to reduce their taxable income for each qualifying dependent before it was suspended by tax reform in 2018.