You opened the IRS notice. There is the tax you owe — and then there is the penalty on top of it, making an already painful number even worse. What most people do not know is that the IRS has a formal program that can eliminate those penalties completely if you meet a straightforward set of criteria. It is called First Time Penalty Abatement, and it is one of the most underused forms of tax relief available to individuals and businesses alike.
This is not a loophole. It is an official IRS policy written into the Internal Revenue Manual. The IRS grants it routinely — to people who ask for it correctly.
What Is First Time Penalty Abatement?
First Time Penalty Abatement (FTA) is an administrative waiver the IRS grants to taxpayers who have a clean compliance history and then slip up for the first time. The IRS describes it as relief for taxpayers who have generally complied with tax laws but made a one-time mistake — late filing, late payment, or a failure to deposit payroll taxes.
The program exists because the IRS recognizes that penalties are meant to encourage compliance, not punish people who have a solid track record but had one bad year. If you have been doing everything right and then life happened — a medical emergency, a divorce, a cash-flow crisis — the IRS has an official path to remove those penalties without requiring you to prove hardship.
FTA is separate from penalty abatement based on reasonable cause, which requires you to explain and document why you could not comply. FTA is simpler: it is based almost entirely on your compliance history, not your story.
Which Penalties Can Be Removed Under FTA?
| Penalty Type | IRC Section | Who It Affects | FTA Eligible? |
|---|---|---|---|
| Failure to File | § 6651(a)(1) | Individuals and businesses who filed late | Yes |
| Failure to Pay | § 6651(a)(2) | Anyone who did not pay by the due date | Yes |
| Failure to Deposit | § 6656 | Employers who missed payroll tax deposits | Yes |
| Accuracy-Related Penalty | § 6662 | Underreported income, negligence | No |
| Fraud Penalty | § 6663 | Fraudulent returns | No |
| Trust Fund Recovery Penalty | § 6672 | Responsible persons for unpaid payroll taxes | No |
FTA applies to one tax period at a time. If you have penalties across multiple years, you can typically only get FTA for the most recent year — but you may be able to pursue reasonable cause abatement for the others.
Do You Qualify? The FTA Checklist
1. Clean Penalty History
You must have no penalties assessed (other than estimated tax penalties) in the three tax years prior to the year you are requesting abatement for. If the IRS assessed a failure-to-file penalty in 2022 and you are now requesting FTA for 2023, you likely will not qualify. A clean three-year record is the foundation of the entire request.
2. You Have Filed All Required Returns
You must have filed all returns currently required — or filed valid extensions. If you have unfiled returns sitting out there, the IRS will not grant FTA. Get current before you request anything.
3. You Have Paid or Arranged to Pay the Tax Owed
You must have paid the underlying tax in full, or entered into an installment agreement or other arrangement to pay it. The IRS will not waive penalties on a balance you have made no move to resolve. If you are not yet on a payment plan, look at your IRS payment plan options before making the abatement request — being in a current agreement satisfies this requirement.
How to Request First Time Penalty Abatement
Option 1: Request by Phone (Fastest)
For most people with straightforward situations, a phone call to the IRS is the fastest path. Call the number on your IRS notice, or the general individual line at 1-800-829-1040. For business accounts, call 1-800-829-4933.
When you get through, tell the representative you would like to request First Time Penalty Abatement under IRM 20.1.1.3.6. Having the IRM citation ready signals that you know what you are asking for. The representative will pull your account history, verify your three-year compliance record, and — if you qualify — can grant the abatement right there on the call.
What to say:
“I am calling to request First Time Penalty Abatement for the failure-to-[file/pay] penalty on my [year] Form [1040/1120/941]. I have a clean penalty history for the prior three years, all my returns are filed, and I have paid the balance in full / am currently in an installment agreement. I would like to request abatement under the IRS First Time Abatement policy.”
Write down the representative’s name, their ID number, and the date and time of the call. Get the confirmation number if abatement is granted. If denied, ask for the specific reason in writing.
Option 2: Written Request (Better Paper Trail)
If your case is more complex, you want a paper trail, or you have already been denied by phone and want to escalate, submit a written request to the IRS service center that issued the penalty notice. Include your name, SSN or EIN, the tax year and form number, the specific penalty amount, a clear statement that you are requesting FTA under IRM 20.1.1.3.6, confirmation that you have a clean three-year history, that all returns are filed, and that you have paid or arranged to pay. Send certified mail with return receipt and keep everything.
Common Mistakes That Get FTA Requests Denied
Not Checking Your Penalty History First
Before you call or write, pull your IRS account transcript. If there is a penalty from three years back you forgot about — even a small one — your FTA request will be rejected. Know your record before you make the request.
Having Unfiled Returns
This is the most common disqualifier. You must be fully current on filing before the IRS will consider FTA. If you have back years that have not been filed, address those first. A back taxes resolution strategy may need to come before the abatement request.
Not Following Up After a Phone Grant
The IRS representative may grant abatement on the phone, but mistakes happen. Pull your transcript three to four weeks after the call to confirm the penalty actually came off your account. If it did not, call back with your confirmation number.
Accepting a Denial Without Appeal
A denial from the first IRS representative is not the end of the road. You can request to speak with a supervisor, submit a written protest, or appeal to the IRS Independent Office of Appeals. Denials get reversed regularly when a qualified representative pushes back with the right documentation.
How Much Can FTA Actually Save You?
The failure-to-file penalty is 5% of the unpaid tax per month, up to 25%. The failure-to-pay penalty is 0.5% per month, up to 25%. On a $20,000 balance, those two penalties alone can add $5,000 to $10,000 or more to what you owe — before interest. FTA removes all of that penalty balance for the qualifying period, which is often the single largest dollar-value relief available to someone with a first-time compliance problem.
You Do Not Have to Handle This Alone
First Time Penalty Abatement is one of the most straightforward forms of IRS relief — but only when you know your account history, understand the eligibility rules, and present the request correctly. One missed detail can mean a denial that takes months to appeal.
Luisa N. Victoria is a Federally Authorized Enrolled Agent with authority to represent you directly before the IRS in all 50 states. She reviews your full account picture — penalties, compliance history, unfiled years, current balances — and builds the strongest possible abatement argument before making contact with the IRS on your behalf. If FTA does not apply, she knows what does.
Stop guessing at IRS procedures while penalties keep accruing. Book My Strategy Session