First-Time Penalty Abatement: Get IRS Penalties Waived (2026)

First-Time Penalty Abatement (FTA) is an administrative waiver policy established by the IRS under Internal Revenue Manual (IRM) Section 20.1.1.3.6.1. It allows the IRS to abate (remove) certain penalties for taxpayers who have a clean compliance history. FTA is not a law or regulation—it is an internal IRS policy that directs IRS employees to consider penalty relief for qualifying taxpayers before evaluating whether reasonable cause exists. This is an important distinction: under FTA, you do not need to provide a reason for your failure to file or pay on time. You simply need to meet the eligibility criteria. The penalties eligible for FTA are the failure-to-file penalty under IRC Section 6651(a)(1), which accrues at 5% of the unpaid tax per month up to 25%; the failure-to-pay penalty under IRC Section 6651(a)(2), which accrues at 0.5% of the unpaid tax per month up to 25%; and the failure-to-deposit penalty under IRC Section 6656, which applies to businesses that fail to make timely employment tax deposits. FTA can be applied to only one tax period per request—for example, if you have penalties for 2023, 2024, and 2025, you can use FTA for one of those years and would need to pursue reasonable cause abatement for the others. The IRS applies FTA on a first-eligible-year basis, meaning the earliest qualifying year is abated first. The financial impact of FTA can be substantial—a taxpayer with a $20,000 balance could have $5,000 or more in penalties removed, plus the interest that accrued on those penalties.

To qualify for First-Time Penalty Abatement, you must meet three specific criteria, all of which are evaluated at the time of your request. First, you must have a clean penalty history for the three tax years prior to the tax year for which you are requesting abatement. This means no penalties (other than estimated tax penalties under IRC Section 6654 or 6655, which do not count) were assessed on your account for those three prior years. Penalties that were previously abated do count against you—if you received FTA for tax year 2022, you cannot use it again until tax years 2023, 2024, and 2025 have a clean record, effectively making FTA available approximately once every four years. Second, you must have filed all currently required returns or have filed a valid extension of time to file. If you have any unfiled returns, the IRS will not grant FTA until those returns are filed. Third, you must have paid, or arranged to pay (through an installment agreement), any tax that is due. You do not need to have paid the tax in full at the time of the FTA request, but you need to be in compliance—either the balance is paid, you are on an installment agreement, or the return is not yet due. The IRS evaluates these criteria using its internal records, including your Master File tax account transcripts. When you call to request FTA, the IRS representative will check your account for prior penalties and current filing compliance before making a determination. In most cases, if you meet the criteria, the abatement is processed during the phone call.

There are three methods to request FTA, and the fastest is typically a phone call to the IRS. Call the number listed on your penalty notice (usually the IRS individual line at 800-829-1040 or the business line at 800-829-4933) and tell the representative you would like to request first-time penalty abatement for the specific tax year and penalty type. The representative will check your account, verify that you meet the three eligibility criteria, and if you qualify, process the abatement while you are on the phone. You should receive an adjusted notice within 4 to 6 weeks reflecting the reduced balance. If you prefer a written request, you can send a penalty abatement letter to the IRS service center address listed on your notice. Your letter should reference the specific penalty, the tax year, and your taxpayer identification number, and state that you are requesting relief under the IRS's first-time abatement policy per IRM 20.1.1.3.6.1. Include a statement confirming that you have filed all required returns and have paid or arranged to pay the underlying tax. Written requests typically take 8 to 12 weeks to process. The third option is filing IRS Form 843 (Claim for Refund and Request for Abatement). Check box 5a for the type of penalty and write "First-Time Penalty Abatement per IRM 20.1.1.3.6.1" in the explanation section. Form 843 is particularly useful if you have already paid the penalty and are seeking a refund, as it creates a formal claim for refund. If the IRS denies your FTA request, you can request a review by a supervisor (during a phone call) or appeal the denial to the IRS Independent Office of Appeals.

If you do not qualify for FTA—because you have penalties in the prior three years or do not meet another eligibility requirement—you can still request penalty abatement under the reasonable cause standard. Under IRC Section 6651(a), penalties may be abated if the taxpayer shows that the failure to file or pay was due to reasonable cause and not willful neglect. The IRS defines reasonable cause as exercising ordinary business care and prudence but still being unable to comply with the tax obligation. IRM 20.1.1.3.2 lists specific circumstances that may constitute reasonable cause: death, serious illness, or unavoidable absence of the taxpayer or an immediate family member; fire, casualty, natural disaster, or other disturbance that destroyed records or prevented compliance; inability to obtain records necessary for the return; reliance on erroneous written advice from the IRS; reliance on a tax professional who failed to file or advise properly (you must show you provided the professional with all necessary information); and undue hardship in making a deposit or payment. When requesting reasonable cause abatement, you must provide a written explanation and supporting documentation. For medical reasons, provide doctor's letters, hospital records, or insurance documentation. For natural disasters, reference FEMA disaster declarations. For reliance on a tax professional, provide the engagement letter and correspondence showing you provided timely information. The IRS evaluates each case individually based on the specific facts and circumstances. If your reasonable cause request is denied, you can appeal to the IRS Independent Office of Appeals, and if that fails, you may be able to petition the U.S. Tax Court for a penalty review under IRC Section 6751(b).

To maximize the financial benefit of penalty abatement, consider several strategic factors. First, request FTA for the tax year with the largest penalty. Since FTA applies to only one tax period, targeting the year with the highest penalty amount yields the greatest savings. Remember that when the IRS abates a penalty, it also removes the interest that accrued on that penalty from the assessment date forward. For older penalties, the accumulated interest can exceed the penalty itself. Second, if you have penalties across multiple tax years, use FTA for the largest penalty year and pursue reasonable cause abatement for the remaining years. This layered approach can potentially eliminate all penalties across multiple years. Third, consider the timing of your request. If you currently have a penalty for a recent year and expect to have a clean record going forward, it may be worth waiting until you can use FTA for the most expensive penalty year. However, do not wait too long—the refund statute of limitations under IRC Section 6511 generally limits refund claims to three years from the date the return was filed or two years from the date the tax was paid, whichever is later. Fourth, if you are currently in an installment agreement, penalty abatement reduces your total balance, which means you will pay off the agreement faster or can reduce your monthly payment amount. After receiving penalty abatement, contact the IRS to recalculate your installment agreement payment based on the reduced balance. Finally, consider using Form 843 instead of a phone request if you have already paid the penalty, as this creates a formal refund claim with specific legal protections and deadlines for IRS response.

First-Time Penalty Abatement is available to businesses as well as individuals. For businesses, the most commonly abated penalty under FTA is the failure-to-deposit penalty under IRC Section 6656, which applies when an employer fails to make timely federal employment tax deposits (Forms 941, 940, 944). The failure-to-deposit penalty is tiered: 2% for deposits 1-5 days late, 5% for deposits 6-15 days late, 10% for deposits more than 15 days late, and 15% for deposits not made within 10 days of an IRS notice. For S corporations, partnerships, and LLCs taxed as partnerships, FTA can also apply to the late-filing penalty under IRC Section 6699 (for S corps) and IRC Section 6698 (for partnerships), which is $220 per partner or shareholder per month (for returns due in 2024 and later) for up to 12 months. For a partnership with 10 partners, the maximum penalty is $26,400—making FTA extremely valuable for business filers. One important limitation: FTA does not apply to estimated tax penalties under IRC Sections 6654 (individuals) and 6655 (corporations). These penalties are calculated based on a formula and are not subject to administrative waiver. However, estimated tax penalties may be reduced or eliminated if you meet one of the safe harbor provisions: paying 90% of the current year tax, paying 100% of the prior year tax (110% for high-income taxpayers with AGI over $150,000), or demonstrating that the penalty arose due to a casualty, disaster, or other unusual circumstance. If your estimated tax penalty does not qualify for FTA or safe harbor, reasonable cause abatement remains available if you can demonstrate circumstances that prevented timely estimated payments.