Overview
First-Time Penalty Relief (commonly called first-time penalty abatement or FTA) is an administrative waiver the IRS offers to eligible taxpayers to remove certain penalties — most commonly the failure-to-file (FTF), failure-to-pay (FTP), and failure-to-deposit penalties. In my 15+ years helping individuals and small businesses with tax compliance, I’ve seen FTA frequently resolve otherwise crushing penalty balances when the taxpayer’s recent compliance history is strong (IRS: First-Time Penalty Abatement).
This article explains who typically qualifies, the evidence and documentation the IRS expects, the step-by-step request process (phone, written, or via a tax pro), common mistakes to avoid, and what to do if FTA is denied.
(For official IRS guidance, see the IRS First-Time Penalty Abatement page: https://www.irs.gov/newsroom/first-time-penalty-abatement.)
Who is eligible for First-Time Penalty Relief?
To be eligible for FTA the IRS generally expects all of the following:
- No penalties (other than the estimated tax penalty) for any taxable period in the prior three tax years. This looks at whether penalties were assessed for the three years before the tax year for which you want relief.
- All required tax returns filed on time (or filed with an approved extension) for the years in question.
- The taxpayer must have paid the tax due for the year with the penalty, or have entered into an installment agreement or otherwise made arrangements to pay.
These are the baseline rules used by the IRS; exceptions and administrative programs exist. The FTA is available to individuals, businesses, and self-employed taxpayers, though the specifics and documentation can differ by account type.
Source: IRS First-Time Penalty Abatement (newsroom) and IRS guidance on penalty relief.
What penalties does FTA cover?
FTA most often covers:
- Failure-to-file penalty
- Failure-to-pay penalty
- Failure-to-deposit penalty (for certain employment tax deposit penalties)
FTA is not a universal remedy for every penalty type (for example, civil fraud penalties or accuracy-related penalties require different procedures and standards). If your penalty arises from fraud or deliberate misconduct, FTA will not apply.
How to request First-Time Penalty Relief — step by step
There are three common ways to request FTA. Choose the method that best fits your situation:
1) Call the IRS
- Call the number on your IRS penalty notice (CP-series notice) or the general individual line at 800-829-1040.
- Ask the IRS representative to research and apply the First-Time Penalty Abatement if your account qualifies.
- If you’re calling about an employer or business account, use the phone number shown on the notice or the IRS business line.
2) Request in writing
- Send a signed letter to the address on the penalty notice or to the IRS office handling your account.
- Include: taxpayer name, SSN or EIN, tax year, form (e.g., Form 1040), penalty type and amount, the IRS notice number, and a brief statement that you qualify for First-Time Penalty Relief because you had no penalties for the prior three years and are otherwise in compliance.
- Attach supporting documents: proof of filing, bank statements showing payment or installment agreement confirmation, and any documentation supporting why you filed late if relevant.
3) Through a tax professional
- A licensed tax pro (CPA, enrolled agent, or attorney) can call or prepare a written request on your behalf and represent you with the IRS.
- Tax pros can often expedite review because they know exactly what documentation and citations to provide.
Note: Some penalty types may require Form 843 (Claim for Refund and Request for Abatement) or another specific form; however, for FTA requests regarding individual failure-to-file/failure-to-pay penalties the IRS frequently processes requests through its penalty system rather than requiring a formal Form 843 filing. If in doubt, reference the notice instructions or ask the IRS or your tax pro.
What to include in a written request
Include these items to reduce back-and-forth and shorten processing time:
- Full legal name, SSN or EIN, and current address
- Tax year(s) and return form(s) involved
- IRS notice number and date from your penalty notice
- Exact penalty types and dollar amounts
- Clear statement that you meet FTA criteria (no penalties in prior three years; returns filed; tax paid or payment plan in place)
- Copies of prior-year returns (if requested), a copy of the return for the year in question, and documentation of payments or an installment agreement
- A brief, factual summary of any extenuating circumstances, if applicable
- Your daytime phone number and signature
Keep copies of everything you send and send by certified mail if you want delivery confirmation.
Typical timeline and what to expect
- If the abatement is straightforward and meets the automated criteria, it can be processed quickly — sometimes within a few weeks. More complex or manually reviewed cases may take months.
- The IRS will notify you by mail if they grant the abatement or if they need more information.
- Interest on unpaid tax is not abated by FTA — only penalties are removed. Interest continues to accrue until tax is paid in full or suspended by other IRS action.
If your FTA request is denied
If denied, you have options:
- Ask for reconsideration: Submit a more detailed written request explaining circumstances and include documentation showing compliance in prior years and payment arrangements.
- Pursue penalty abatement for reasonable cause: If you can show you exercised ordinary business care and prudence but were unable to meet obligations due to circumstances beyond your control (serious illness, death in the family, natural disaster), you can request abatement on that basis. See our related article on “Reasonable Cause for Penalty Abatement” for guidance: https://finhelp.io/glossary/reasonable-cause-for-penalty-abatement/
- Consider other relief programs: The IRS offers administrative waivers and disaster-related relief in certain years.
- Appeal the decision: If you disagree with a final IRS determination, you can appeal using the IRS appeals process. A tax professional can advise on the best path.
For more on general abatement approaches, see “How to Get Penalty Abatement”: https://finhelp.io/glossary/how-to-get-penalty-abatement/ and the FinHelp glossary entry “First-Time Penalty Abatement Relief”: https://finhelp.io/glossary/first-time-penalty-abatement-relief/
Common mistakes that delay abatement
- Not checking the three-year penalty history: If any penalties were assessed in the prior three tax years (other than estimated tax penalty), FTA may not apply.
- Missing documentation: Failing to show that returns were filed, taxes paid, or an installment agreement in place.
- Assuming interest is removed: Interest is separate and continues until payment is made.
- Waiting too long: Address penalties promptly — balances grow quickly because of interest and additional penalties.
Practical tips from practice
- File the missing return immediately even if you can’t pay. Filing starts the clock for many administrative relief options and reduces failure-to-file penalties.
- If you can’t pay in full, request a short-term extension to pay or an installment agreement; having an agreement in place helps the FTA case.
- Document everything. In my practice, cases where taxpayers proactively collected proof (bank records, hospital records, correspondence) get resolved faster.
Examples (de-identified)
- Example A: A retiree filed timely for many years but missed a single year due to hospitalization. After filing the missing return and submitting a written FTA request with hospital records, the IRS abated the failure-to-file penalty.
- Example B: A self-employed contractor fell behind on deposits once during a cash crunch. Because there were no prior penalties for three years and a current installment agreement was in place, the employer deposit penalty was abated under FTA.
Frequently asked questions
Q: Can I use FTA more than once?
A: FTA is intended to be used once per taxpayer account as an administrative relief. However, specific circumstances and different penalty types across separate tax periods can create exceptions — consult a tax pro.
Q: Will FTA remove interest?
A: No. FTA generally only removes penalties; interest on unpaid taxes continues to accrue until the tax is paid.
Q: Do I need Form 843 to request FTA?
A: Not usually for individual failure-to-file or failure-to-pay penalties. The IRS often handles FTA through its penalty systems or phone requests. For certain employer/excise penalties or if you are seeking a refund, Form 843 may be required. Check the notice instructions or ask a tax professional.
Sources and further reading
- IRS — First-Time Penalty Abatement: https://www.irs.gov/newsroom/first-time-penalty-abatement
- IRS — Penalty Relief FAQs and notices (search relevant CP notices on IRS.gov)
- FinHelp related glossary: First-Time Penalty Abatement Relief (https://finhelp.io/glossary/first-time-penalty-abatement-relief/)
- FinHelp related glossary: Reasonable Cause for Penalty Abatement (https://finhelp.io/glossary/reasonable-cause-for-penalty-abatement/)
- FinHelp related glossary: How to Get Penalty Abatement (https://finhelp.io/glossary/how-to-get-penalty-abatement/)
Professional disclaimer
This article provides general information and examples based on industry practice. It is not personalized tax advice. For advice tailored to your situation, consult a qualified tax professional (CPA, enrolled agent, or tax attorney). FinHelp.io and the author are not providing legal or tax representation.
If you’d like, I can draft a template letter you can send to the IRS (customized to your facts) or review a draft request you received from the IRS.