Qualifying and Requesting IRS First Time Penalty Abatement Waiver

First-time penalty abatement (FTA) is when the IRS removes penalties from your taxes owed. That includes penalties for failure to file, failure to pay, and failure to deposit. The IRS also removes interest related to those penalties. It applies to the tax periods ending after December 31st, 2000, and it is sometimes called one-time forgiveness. In March 2023, the Internal Revenue Manual was updated with changes to the FTA program (discussed below), and starting in 2026, the IRS began offering automatic first-time penalty abatement to tax returns from tax years 2025 and moving forward.

Key takeaways

• First-time abatement applies to failure to deposit, failure to file, and failure to pay penalties.
• The IRS offers FTA automatically for qualifying individual and business taxpayers, as of filing season 2026.
• To qualify, you must not have incurred any penalties the three previous tax years. 
• If you don't qualify for automatic FTA, you may want to apply for penalty relief based on reasonable cause. 

Which Penalties Does the First Time Penalty Abatement Cover?

The FTA erases failure-to-file penalties for 1040s (individuals), 1065s (partnerships), and1120-Ss (S-Corps). The penalty is 5% of your balance per month and can get up to 25% of your balance.

The FTA also eliminates the failure-to-pay penalty for 1040s (individuals). This penalty is 1/2 percent (.5%) of your outstanding taxes owed per month. It increases to 1% of your balance after a certain period of delinquency and drops down to 0.25% monthly if you set up an installment agreement. This penalty can also get up to 25% of your balance. 

 If you have failure-to-pay or file penalties related to an audit, you may be able to get rid of those as well (but not accuracy-related penalties).

Finally, the FTA also erases penalties related to a Failure to Deposit (941s) regarding payroll taxes (employment taxes).  This would include things such as the deposit wasn’t made timely, for the correct amount, or in the correct manner.

How to Qualify for the First Time Penalty Abatement (FTA)

FTA is offered automatically as of 2026, but to qualify for this penalty abatement, you must meet three basic criteria:

1. You incurred no penalties or penalty abatements for the three prior tax years to the year you are requesting an FTA for. If you incurred penalties for underpaying estimated tax in previous years, don’t worry. The IRS does not take those penalties into account. You can still qualify for the first-time penalty abatement. If you were only required to file this type of return for fewer than three years, the IRS will only take that time period into account. 

2. You have filed an original return for the year you are requesting an FTA for and the 3 prior years.

For business taxpayers, the IRS also considers whether you've incurred four or more failure to deposit waiver codes in the last three tax years and whether you've incurred a failure to deposit penalty for EFTPS avoidance. If so, you will not qualify for FTA.

Eligibility for First Time Penalty Abatement Tool

This quick tool walks you through a few simple questions to help you determine whether you may qualify for FTA based on IRS guidelines. If you are eligible, you should receive automatic relief, but if not, you can use TaxCure to find a local professional who can help with the request. If you are not eligible, we will show you the next steps you can take to get there.

How to Apply for a First Time Penalty Abatement

Before the IRS started offering automatic first-time relief, taxpayers could apply for first-time penalty abatement online, in writing--check out this sample abatement letter, or over the phone. In most cases, if you don't receive relief automatically, you can make the request over the phone but you can leverage Form 843.  

In some cases, if you qualify, the IRS removes the penalties on the spot. In other cases, the IRS agrees to remove the penalties, but it does not do so until the tax owed is paid in full. To get an FTA, the taxpayer has to have an outstanding balance or the RSED (refund statute expiration date) for the FTA year in question cannot be expired.

If the IRS refuses to remove the penalties right away, you will continue to see the penalties growing. As long as you qualify for the abatement, you don’t have to worry about that. The penalties will be removed eventually.

How Much Can Be Abated

The IRS only removes penalties incurred in the first year. There is a monetary limit on the number of penalties that can be removed. The agency has not published a limit, but it appears to be up to $10,000 for most phone calls. Taxpayers can get an FTA over $10,000 but generally requires the request in writing. Furthermore, the IRS allows the FTA once every four years.

Abatement for Penalties More Than a Year Old

If you have tax penalties that extend back more than a year, or you intend to abate other types of penalties (e.g. Accuracy Related Penalty) the IRS will only remove them if you show “reasonable cause.” That means that you had a serious reason for not paying or filing your taxes. To qualify, the situation must be out of your control. However, you must also show that you took steps to get past the issue. Basically, the IRS wants to see that you really tried to comply, but that it truly wasn’t possible. In most cases, you will want to leverage Form 843 and attach a letter explaining the circumstances showing why you were unable to comply.

Examples of Reasonable Cause

There are a number of situations that can constitute reasonable cause. Here are some of the most common reasons accepted by the IRS:

• Records destroyed by flood, fire, or natural disaster
• Inability to calculate the amount owed due to a lack of records
• You were in Rehab or Prison
• You were held hostage in another country
• A close family member (spouse, child, etc) died
• A civil disturbance such as a mail strike prevented you from making payment
• You received bad information from a tax professional
• Bad advice from an IRS representative

In many cases, you may want to appeal or have a tax professional appeal on your behalf if a penalty abatement request is initially denied. Some important questions to consider: 

• Do you have good reason that relates to why you were unable to comply?
• Do the dates and times coincide?
• If business related, can you show documentation that shows that business care or prudence was used?
• Have you abated tax penalties in the past and what is your compliance history?

In some cases, you can even receive an abatement for an error. However, you need to demonstrate that the error was made in good faith. The IRS may also accept other reasons. You should show that the issue created a situation where you truly couldn’t pay or file on time.

The IRS offers first-time penalty abatement and abatement for reasonable cause for other years or other types of penalties. However, many taxpayers don’t even know about these programs.

If you are looking for assistance with a tax professional who has penalty abatement experience, start a search below. Or keep reading to learn more about common reasons the IRS abates penalties.

FAQs About First-Time Penalty Abatement

Do you have to apply for first-time penalty abatement?

No, for tax years 2025 and on, the IRS plans to automatically apply first-time abatement for qualifying taxpayers. For returns related to tax years prior to 2025, taxpayers had to ask for abatement by calling the IRS, writing a letter, or sending in Form 843.

What if you don't qualify for first-time abatement?

Then, you should look into other options for penalty abatement. The IRS may waive penalties if you have reasonable cause, which is when a serious issue out of your control prevents you from paying or filing taxes on time. The IRS also offers penalty waivers if you paid, filed, or deposited late due to erroneous advice from the IRS. 

Can you only get first-time abatement once?

No, you can get first-time abatement multiple times, but only every four years. To qualify, you cannot have any penalties during the last three filing years. Although this type of relief is available periodically, the IRS uses the phrase "first-time" and tax relief companies often refer to it as "one-time" forgiveness, leading to even more confusion.