First-Time Penalty Abatement: The IRS Program Most Taxpayers Don’t Know About

Introduction: When One Mistake Doesn’t Have to Cost You

Getting hit with IRS penalties can feel like adding insult to injury—especially when you’re already paying your taxes or working to resolve your balance. Late filing. Late payment. Failure to deposit. These penalties stack up fast.

But here’s what most taxpayers don’t know:

The IRS has a policy called First-Time Penalty Abatement (FTA)—and it can wipe out those penalties completely for eligible individuals and businesses.

This blog breaks down what FTA is, how to qualify, how to request it, and when to use it strategically. Whether you made a one-time mistake or are helping a client clean up their account, this relief option could save you hundreds—or thousands—of dollars.

What Is First-Time Penalty Abatement (FTA)?

First-Time Penalty Abatement is a discretionary IRS policy that allows taxpayers to remove penalties for:

• Failure to File (FTF)

• Failure to Pay (FTP)

• Failure to Deposit (FTD)

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It applies to a single tax year (or a single quarter, for deposit penalties), and only once per taxpayer per penalty type. FTA is often the simplest form of IRS penalty relief, but many eligible taxpayers never request it.

FTA is not a forgiveness program. It’s a reward for maintaining a clean compliance history.

Who Qualifies for First-Time Penalty Abatement? 

To qualify for FTA in 2025, the IRS requires that:

1. You Have a Clean Filing and Payment History

   • No unreversed penalties in the prior 3 years (estimated tax penalties are excluded)

   • All required returns have been filed or there is no filing requirement

2. You Are Currently in Compliance

   • The return related to the penalty has been filed

   • The tax has been paid or payment arrangements (e.g., installment plan) are in place

3. The Penalty Is Eligible

   • FTA applies to penalties under IRC 6651(a)(1) (late filing), 6651(a)(2) (late payment), and 6656 (failure to deposit)

   • It does NOT apply to estimated tax penalties, accuracy-related penalties, fraud penalties, or penalties related to event-based returns (e.g., Form 706 or 709)

     
     

How Much Can It Save You?

Penalty amounts can quickly become expensive:

• Failure-to-file: 5% of unpaid tax per month, up to 25%

• Failure-to-pay: 0.5% per month, up to 25%

  
  

Example: If you owe $10,000 in tax and file your return six months late, you could face up to $1,500 in combined penalties. With FTA, those penalties could be eliminated entirely (though interest still applies).

How to Request First-Time Penalty Abatement

FTA requests can be made in three ways:

1. By Phone

   • Call the IRS at the number listed on your notice

   • Request First-Time Abate specifically, citing the tax year and penalty

   • Ensure your compliance is current before calling

2. In Writing

   • Respond to your penalty notice with a letter

   • Include name, SSN/EIN, tax year, and a statement requesting First-Time Penalty Abatement

   • Reference IRM 20.1.1.3.3.2.1 if necessary

3. Through a Tax Practitioner

   • Tax professionals with POA can use IRS e-Services or the practitioner hotline

   • Form 843 can be used if penalties have already been paid and you’re requesting a refund (must be filed within 3 years of return due date or 2 years of payment)

   
   

Strategic Use of FTA: When to Use It and When to Wait 

FTA is a one-time-per-taxpayer-per-penalty-type benefit, so timing matters.

Use FTA When:

• The penalty is substantial and from a one-time mistake

• You’re compliant and current

• You don’t anticipate needing it again soon

  
  

Wait If:

• You expect a larger penalty next year and want to preserve eligibility

• You have multiple years to fix and may benefit more by consolidating the relief

• Your compliance isn’t current yet (return unfiled, tax unpaid)

What If You Don’t Qualify?

If FTA isn’t available, you might still qualify for:

• Reasonable Cause Abatement: For circumstances like illness, natural disasters, or misinformation from the IRS

• Statutory Relief: If the IRS made an error or gave incorrect written advice

• Appeals: File a request through the IRS Office of Appeals with documentation

These options are more involved and document-heavy, but may apply if FTA doesn’t.

Common Mistakes to Avoid

• Assuming the IRS applies FTA automatically (they don’t)

• Using FTA too early and losing it before a bigger need

• Requesting before filing or paying

• Attempting to apply FTA to ineligible penalties (like estimated taxes)

Conclusion: Don’t Pay More Than You Have To

Mistakes happen. The IRS recognizes that. If this is your first penalty and your compliance record is clean, the First-Time Penalty Abatement program gives you a chance to recover without unnecessary cost.

It’s not automatic—but it is accessible. Know your rights, request abatement the right way, and don’t overpay when the IRS has a policy designed to help you get back on track.