IRS First-Time Abatement: Do You Qualify, and How to Ask

First-time abatement (FTA) is an IRS administrative waiver that removes failure-to-file penalties (IRC 6651(a)(1)), failure-to-pay penalties (IRC 6651(a)(2)), and failure-to-deposit penalties for one tax year. It is not a statute. It is an internal IRS policy described in IRM 20.1.1.3.6.1, and it is the single easiest penalty relief available. You do not need to prove reasonable cause, demonstrate hardship, or write a letter. If you meet the criteria, the IRS removes the penalty. The problem is that most taxpayers do not know it exists, and the IRS does not volunteer it.

What are the qualifying criteria?

Three requirements, all of which must be met:

1. Clean compliance history. You must not have had any penalties (or had all penalties removed) for the three tax years prior to the penalty year. If you are requesting FTA for 2024, your 2021, 2022, and 2023 tax years must be penalty-free. A penalty that was assessed and then abated (for any reason, including a prior FTA) counts as clean for this purpose, because the IRM looks at whether a penalty was “assessed and remained on the module,” not whether one was ever proposed. A small penalty that was never abated will disqualify you.

2. Filing compliance. You must have filed all currently required returns, or filed valid extensions. “Currently required” means as of the date you request FTA, not the original due date. If you have an unfiled 2022 return and you are requesting FTA for 2024, you need to file 2022 first (or demonstrate it was not required). The IRS checks whether your account shows any delinquent filing indicators.

3. Payment compliance. You must have paid, or arranged to pay, any tax due. This does not mean you must pay in full before requesting FTA. An active installment agreement counts. What disqualifies you is having an assessed balance with no payment and no arrangement to pay.

FTA is a one-penalty-per-taxpayer waiver, not a one-time-ever waiver. If you received FTA for 2020 and had no penalties in 2021, 2022, and 2023, you qualify again for 2024. The three-year clean-history clock resets after each FTA use.

Which penalties does FTA cover?

FTA applies to three types of penalties:

Failure to file (IRC 6651(a)(1)): 5% of the unpaid tax per month, up to 25%. This is the penalty for filing your return after the due date (including extensions).

Failure to pay (IRC 6651(a)(2)): 0.5% of the unpaid tax per month, up to 25%. This is the penalty for not paying the tax by the original due date, even if the return was filed on time.

Failure to deposit (IRC 6656): Applies to employers who fail to make timely federal tax deposits. Graduated from 2% to 15% depending on how late the deposit is.

FTA does not apply to:

• Accuracy-related penalties (IRC 6662): The 20% penalty for negligence, substantial understatement, or substantial valuation misstatement. These require a reasonable cause defense.
• Estimated tax penalties (IRC 6654/6655): The underpayment penalty for not making quarterly estimated payments. This penalty is calculated as interest and cannot be abated under FTA.
• Information return penalties: FBAR penalties, Form 3520 penalties, Form 5471/5472 penalties, and other international information return penalties have their own abatement rules and are not covered by FTA.
• Fraud penalties (IRC 6663): FTA does not apply to fraud.

For cross-border filers, the key limitation is that FTA does not help with the international information return penalties that are often the largest part of the penalty bill. If you owe $800 in failure-to-file penalty and $25,000 in Form 5471 penalties, FTA covers the $800 but not the $25,000. The Form 5471 penalties require a separate reasonable cause argument.

How do I request FTA?

By phone (fastest). Call the IRS at 800-829-1040 (individuals) or 800-829-4933 (businesses). When you reach an agent, say: “I would like to request first-time abatement for the [failure to file / failure to pay] penalty on my [year] return.” The agent can check the criteria and apply FTA during the call. If approved, the penalty is removed and any payment already made toward the penalty is applied to remaining tax, interest, or refunded.

By letter. Write to the address on the penalty notice. Reference the penalty, the tax year, and the IRM section (20.1.1.3.6.1). State that you meet the three criteria. This takes longer (8 to 12 weeks for processing) but creates a paper trail.

On Form 843 (refund request). If you already paid the penalty and want a refund, file Form 843 requesting abatement and refund. Check the box for “first-time abatement” or reference IRM 20.1.1.3.6.1 in the explanation section. The refund statute of limitations applies: you must file within two years of the date you paid the penalty or three years from the date the return was filed, whichever is later.

The phone approach is the best option for most taxpayers. The agent can verify the criteria in real time, and if you qualify, the penalty is removed while you are on the call. If the first agent says no (some agents are not familiar with FTA), call back and try a different agent, or ask to speak with a manager. FTA is a well-established IRS policy, not a discretionary favor.

What if the IRS says no?

Two scenarios:

You do not meet the criteria. If you had a penalty in the prior three years that was not abated, FTA is not available. The alternative is a reasonable cause abatement request, which is a separate, fact-based analysis. Reasonable cause requires demonstrating that you exercised ordinary business care and prudence but were unable to comply. Common reasonable cause arguments: reliance on a tax professional, serious illness, natural disaster, death of a family member, or inability to obtain records. Reasonable cause is harder than FTA (you need to prove something, not just check boxes), but it covers a wider range of penalties including accuracy-related penalties that FTA does not reach.

The agent applied the criteria incorrectly. If you believe you meet the FTA criteria and the IRS disagrees, request a manager review or submit a written request referencing IRM 20.1.1.3.6.1. If the written request is denied, you can request an appeal to IRS Appeals. The Appeals officer will independently review the criteria and the agent’s determination.

If both FTA and reasonable cause fail, the penalty stands. You can pay the penalty and file a refund claim (Form 843), which preserves your right to take the issue to court if the refund is denied.

Should I use FTA or save it?

FTA can only be used once per three-year clean period. If you have a small penalty this year and expect a larger penalty next year, saving FTA for the larger penalty makes financial sense. But this requires predicting the future, which is unreliable. The general rule: use FTA now. A penalty in hand is worse than a penalty that might never happen. If you use FTA this year and incur a penalty next year, you file for reasonable cause on the next year’s penalty.

The one exception: if you know you will have a larger penalty next year (because you are about to file a significantly late return or you already know the tax due is substantial), it may be worth paying the smaller current penalty and saving FTA for the known larger one. This is a judgment call, and it depends on the dollar amounts.

What should I do next?

Check your penalty notice. Identify whether the penalty is a failure-to-file, failure-to-pay, or something else. If it is one of the FTA-eligible penalties, check the three criteria: no penalties in the prior three years, all returns filed, tax paid or in an arrangement. If you qualify, call the IRS and request FTA. If you do not qualify (or the penalty is not FTA-eligible), prepare a reasonable cause abatement request.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.