First-Time Penalty Abatement: How to Get IRS Penalties Removed With One Phone Call

By Yarik Yarosh, CPA ·September 5, 2026 ·Updated October 4, 2026 ·7 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

The IRS First-Time Penalty Abatement (FTA) is an administrative waiver available under IRM 20.1.1.3.6.1 that allows the IRS to remove failure-to-file and failure-to-pay penalties for one tax period. It is the easiest form of penalty relief because it requires no documentation, no explanation of reasonable cause, and can often be resolved with a single phone call. The only requirements are: (1) the taxpayer (or entity) has no penalties for the prior 3 tax years, (2) all required returns have been filed (or valid extensions were in place), and (3) all taxes owed have been paid or the taxpayer is on an approved payment plan. FTA is applied BEFORE reasonable cause, meaning if FTA is available, the IRS representative should grant it without requiring a reasonable cause explanation. If FTA is denied (because the 3-year clean history requirement is not met), reasonable cause arguments can still be made.

✓Key takeaway

First-Time Penalty Abatement requirements:

Requirement	Details
Clean compliance history	No penalties (after any abatement) in the 3 tax years before the penalty year
All required returns filed	All returns filed or on valid extension
Taxes paid or payment plan	All taxes owed are paid, or taxpayer is on an approved installment agreement
One period at a time	FTA removes penalties for ONE tax period only

Penalties eligible for FTA:

Penalty	IRC Section	Rate
Failure to file (FTF)	IRC 6651(a)(1)	5% per month, up to 25%
Failure to pay (FTP)	IRC 6651(a)(2)	0.5% per month, up to 25%
Failure to deposit (employment tax)	IRC 6656	2%-15% depending on days late

Penalties NOT eligible for FTA:

Penalty	Why Not
Accuracy-related (IRC 6662)	Requires reasonable cause or substantial authority
Fraud penalty (IRC 6663)	Cannot be abated administratively
Estimated tax penalty (IRC 6654)	Not covered by FTA
Information return penalties (IRC 6721/6722)	Not covered by FTA
Late S-Corp return penalty (IRC 6699)	Can use FTA in some cases, but often requires reasonable cause

How to request FTA:

Method	Details	Timeline
Phone (IRS practitioner priority line)	CPA calls with Form 2848 on file	Same-day resolution
Phone (taxpayer calls)	Call the number on the penalty notice	Same-day resolution
Written request (letter)	Mail to IRS address on notice	4-8 weeks
Form 843 (Claim for Refund)	If penalty has already been paid	4-12 weeks

How much can FTA save?

Hypothetical example

Round numbers. For current guidance, see IRS penalty relief information. A sole proprietor filed their 2024 return 4 months late (due April 15, 2025, filed August 15, 2025) with $20,000 owed.

Penalties assessed:

Penalty	Calculation	Amount
Failure to file (5% per month x 4 months)	$20,000 x 5% x 4 = $4,000 (but max 25%)	$4,000
Failure to pay (0.5% per month x 4 months)	$20,000 x 0.5% x 4 = $400	$400
Combined FTF + FTP (FTF reduced by FTP when both apply)	FTF: $4,000 - $400 = $3,600. FTP: $400.	$4,000
Interest (not a penalty, cannot be abated)	~$500	$500
Total owed		$4,500

FTA request: The sole proprietor has a clean compliance history (no penalties in 2021, 2022, or 2023). All returns are filed. The $20,000 balance has been paid.

FTA Request	Result
Penalties eligible for FTA	$4,000 (FTF + FTP)
Interest	NOT abatable ($500 remains)
Savings from FTA	$4,000

The proprietor saves $4,000 with one phone call (or letter). No documentation required. No “reasonable cause” explanation needed.

S-Corp late filing penalty example: An S-Corp with 3 shareholders files Form 1120-S 5 months late.

Penalty	Calculation	Amount
IRC 6699 penalty	$255/month (returns due in 2026) x 3 shareholders x 5 months	$3,825

FTA can remove the full $3,825 if the S-Corp has a clean 3-year history. For S-Corp penalties, FTA is sometimes coded differently in the IRS system, and the phone representative may need to process it manually. If the first representative is unfamiliar with FTA for S-Corp penalties, call back and speak with a different representative.

Strategic use of FTA: Because FTA is available only once every 3 years (the penalty clears the 3-year lookback), timing matters.

Year	Penalty Event	FTA Available?	Strategy
2023	Small FTP penalty ($200)	Yes	DON’T use FTA (save it for a bigger penalty)
2024	Large FTF penalty ($4,000)	Yes (if 2023 FTA wasn’t used)	USE FTA here ($4,000 savings)
2025	Small FTP penalty ($150)	No (2024 penalty in lookback)	Pay the $150
2026	No penalty	N/A
2027	No penalty	N/A
2028	Penalty assessed	Yes (3 clean years: 2025-2027)	FTA available again

When reasonable cause is better than FTA: If the taxpayer expects MULTIPLE penalty periods (e.g., late filing for 2023 AND 2024), use reasonable cause for one and FTA for the other:

Period	Relief Method	Result
2023 (late filed)	Reasonable cause (death in family, natural disaster, medical emergency)	Penalties abated if reasonable cause accepted
2024 (late filed)	FTA	Penalties abated (clean history if 2023 was abated)

By using reasonable cause for the earlier period and FTA for the later period, both penalties can potentially be removed.

The phone call script: When calling the IRS practitioner priority line:

“I’m calling to request First-Time Penalty Abatement for [taxpayer name], SSN/EIN [number], for the [year] [form type].”
“The taxpayer has a clean compliance history for the prior three years.”
“All returns have been filed and all taxes have been paid.”
If the representative asks for reasonable cause: “I’d like to try First-Time Penalty Abatement first under IRM 20.1.1.3.6.1 before discussing reasonable cause.”

The representative will check the taxpayer’s account. If the 3-year history is clean, they will process the abatement immediately and provide a confirmation number.

Illustrative numbers only, not a real client and not advice for your facts.

What options are available if I can’t pay my tax bill in full?

The IRS offers several payment alternatives. An installment agreement (Form 9465) lets you pay over time, with guaranteed approval for balances under $10,000 if you can pay within 3 years, and streamlined approval for balances under $50,000 payable within 72 months. An Offer in Compromise (Form 656) settles the debt for less than owed, but the IRS accepts only about one-third of applications because you must prove you can’t pay the full amount through income or assets. Currently Not Collectible (CNC) status suspends collection when you demonstrate that paying would create financial hardship, though interest and penalties continue accruing. Penalty abatement (first-time or reasonable cause) can reduce the amount owed by removing failure-to-file and failure-to-pay penalties, which often constitute 25-47% of the balance. Interest is charged on all unpaid balances and generally cannot be abated, which makes resolving tax debt sooner always less expensive.

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Cite this page

Yarik Yarosh, CPA. "First-Time Penalty Abatement: How to Get IRS Penalties Removed With One Phone Call." Blue Cloud CPA, September 5, 2026, updated October 4, 2026. https://bluecloudcpa.com/guides/small-business-irs-first-time-penalty-abatement-irm

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