What Is First-Time Penalty Abatement?

First-Time Penalty Abatement (FTA) is an IRS administrative waiver that allows qualifying taxpayers to have certain penalties removed from their account — without having to prove a specific reason or hardship. It is one of the most underutilized tax relief tools available, largely because the IRS does not proactively tell taxpayers it exists.

If you have a clean compliance history and have been hit with failure-to-file, failure-to-pay, or failure-to-deposit penalties, FTA may eliminate those charges entirely.

Which Penalties Can Be Removed?

First-Time Penalty Abatement applies to three types of penalties:

Failure-to-File Penalty

  • Rate: 5% of unpaid taxes per month (or part of a month), up to a maximum of 25%
  • Minimum (for very late returns): $485 or 100% of the tax owed, whichever is smaller

Failure-to-Pay Penalty

  • Rate: 0.5% of unpaid taxes per month, up to a maximum of 25%
  • Continues to accrue until the balance is paid in full or the maximum is reached

Failure-to-Deposit Penalty

  • Applies to employers who do not timely deposit payroll taxes (Form 941)
  • Rates range from 2% to 15% depending on how late the deposit is made

Note: Interest charged on the underlying tax is not eligible for abatement under FTA. Interest can only be abated if it resulted from IRS errors or delays.

Who Qualifies for First-Time Penalty Abatement?

The IRS applies three criteria to determine FTA eligibility:

1. No Prior Penalties in the Last 3 Years

You must have no significant penalties assessed for the 3 tax years prior to the year for which you are requesting abatement. Minor penalties such as an estimated tax penalty generally do not disqualify you.

2. All Required Returns Filed (or on Extension)

You must be in full filing compliance — all required returns must have been submitted. You cannot request FTA if you have unfiled returns for the years in question.

3. Any Tax Owed Must Be Paid (or You Have an Arrangement in Place)

You must have paid (or arranged to pay) any outstanding tax balances — through a payment in full, an installment agreement, or other approved arrangement.

How to Request First-Time Penalty Abatement

By Phone (Fastest)

A qualified tax professional can request First-Time Penalty Abatement on your behalf — typically a straightforward process that can be resolved quickly.

Have ready:

  • The tax year(s) and penalty type you want abated
  • Confirmation that you are in filing compliance
  • Confirmation that your balance is paid or an agreement is in place

By Written Request

Send a letter to the IRS service center where you file your returns. The letter should:

  • State that you are requesting abatement under the First-Time Abatement policy
  • Identify the tax year, penalty type, and penalty amount
  • Confirm your compliance history
  • Reference IRM 20.1.1.3.6.1 (the IRS internal manual section covering FTA)

Using Form 843

Form 843 (Claim for Refund and Request for Abatement) can be used to formally request penalty abatement. This form is typically used when the penalties have already been paid and you want a refund, rather than when requesting abatement of an unpaid balance.

How Much Can You Save?

The savings depend on the size of your balance and how long penalties have been accruing. On a $20,000 tax balance, a 25% failure-to-file penalty represents $5,000 in charges — all of which can potentially be removed with a single phone call if you qualify.

The failure-to-pay penalty adds another 25%, meaning penalties alone could represent half of your tax balance in extreme cases.

Other Penalty Relief Options

If you do not qualify for FTA — perhaps because you already used it in a prior year — the IRS also provides penalty relief based on Reasonable Cause: documented circumstances such as a serious illness, natural disaster, death of an immediate family member, or IRS error that caused the filing or payment failure.

Reasonable Cause relief requires more documentation and is evaluated on a case-by-case basis.

The Bottom Line

First-Time Penalty Abatement is one of the few times the IRS will remove a charge simply because you ask. Most taxpayers qualify but never know to request it. If you have penalties on your account and a clean compliance history, this call is worth making before you pay another dollar.

Use our free eligibility guide to see what relief options apply to your full situation.