Overview

Penalty abatement for first-time failures is an IRS administrative relief often called First-Time Penalty Abatement (FTPA). FTPA can remove penalties for a single tax period when the taxpayer meets specific eligibility rules — most importantly, a clean penalty record for the prior three years. This relief is powerful because it can eliminate 100% of qualifying penalties and ease short-term cash flow pressure, but it is not automatic for every taxpayer and does not typically remove statutory interest.

Sources: IRS penalty abatement guidance and appeal rights (IRS.gov) (see below).

Who qualifies for first-time penalty abatement?

To be eligible for FTPA, taxpayers generally must meet these core conditions (IRS guidance):

  • No penalties (for the same type) assessed in the three tax years prior to the tax period for which you are requesting relief. This includes failure-to-file, failure-to-pay and failure-to-deposit penalties.
  • All required returns for the prior years have been filed (or properly extended) and any tax due for the period in question is paid or an acceptable payment arrangement is in place.
  • You haven’t previously received FTPA for another tax period in the immediate past three years (administrative discretion applies).

If you don’t meet these tests, you may still qualify for other forms of relief (reasonable cause, disaster relief, or an offer in compromise). See the Alternatives section below.

Authoritative reference: IRS — Penalty Abatement (First Time Abate) (https://www.irs.gov/payments/penalty-abatement).

What penalties can FTPA remove?

FTPA commonly applies to:

  • Failure-to-File (FTF) penalty
  • Failure-to-Pay (FTP) penalty
  • Failure-to-Deposit (FTD) penalty (for payroll tax deposits)

FTPA generally applies only to penalties — it does not usually remove statutory interest, which accrues until tax is paid in full. For more on how interest and penalty interact, see internal explainer: “Understanding Penalty Interest vs Statutory Interest on Taxes.” (FinHelp.io)

Internal resource: Understanding Penalty Interest vs Statutory Interest on Taxes — https://finhelp.io/glossary/understanding-penalty-interest-vs-statutory-interest-on-taxes/

How to request first-time penalty abatement (step-by-step)

  1. Verify eligibility first
  • Confirm you have no penalties for the prior three tax years and that required returns are filed. Use your IRS online account or the notice you received from the IRS to check the assessed penalties.
  1. Gather documentation

  • Proof of timely prior filings (copies of past returns or transcripts), proof of payment history, and any documents explaining the circumstances of the failure-to-file or pay (medical records, proof of a natural disaster, termination notices, etc.). More details on what to include are in our internal guide: “Preparing a Penalty Abatement Request: Documentation to Include.”

    Internal resource: Preparing a Penalty Abatement Request: Documentation to Include — https://finhelp.io/glossary/preparing-a-penalty-abatement-request-documentation-to-include/

  1. Choose a submission method
  • Phone: Call the number on the IRS penalty notice or the general IRS individual phone line. An IRS representative can often process an FTPA request during the call if you meet the criteria.
  • Written request: Send a letter to the address on your notice explaining the request and attaching supporting documents. Include your name, taxpayer identification number, tax year, type of penalty, and the IRS notice number.
  • Tax pro: Authorize a tax professional (Form 2848) to call/submit on your behalf. Many tax professionals prefer to handle FTPA requests to ensure proper documentation and follow-up.
  1. If you already paid the penalty
  • Request abatement and, if granted, ask for a refund of the penalties paid. Depending on the situation you may need to file a claim form (e.g., Form 843) or follow IRS refund procedures — check the IRS instructions and consult a tax professional. Keep in mind the general refund statute of limitations (usually three years from the date you filed the return or two years from the date you paid the tax, whichever is later) — act promptly.
  1. Follow up and escalate if denied
  • Keep records of all contacts and responses. If your request is denied, you may appeal the decision using the administrative appeals process explained in IRS Publication 5 (Your Appeal Rights). If necessary, seek help from a tax advocate or a tax attorney.

Authoritative sources: IRS penalty abatement page; IRS Publication 5 (appeal rights).

External reference: IRS Publication 5 — https://www.irs.gov/pub/irs-pdf/p5.pdf

Documentation checklist (practical)

  • Copy of the IRS notice(s) for the assessed penalty
  • Proof of prior year filings (tax return copies or IRS transcripts)
  • Proof of payment or payment plan for the tax period in question (canceled checks, bank records, EFTPS receipts)
  • Evidence of the reason for the failure (medical records, death certificates, job loss documentation, disaster declarations, shipping logs, or other verifiable records)
  • Power of attorney (Form 2848) if a tax pro will represent you
  • A written explanation (concise, factual, and chronological) of what happened and why FTPA should apply

For a longer list and sample letters, see: “Penalty Abatement: Building a Strong First-Time Relief Claim.”

Internal resource: Penalty Abatement: Building a Strong First-Time Relief Claim — https://finhelp.io/glossary/penalty-abatement-building-a-strong-first-time-relief-claim/

What to expect after you apply

  • Timing: The IRS response time varies. Some phone requests are resolved within the call; written requests can take several weeks. If you requested a refund, processing may take longer.
  • Result: If approved, the IRS will abate eligible penalties for the tax period. Interest generally remains unless separately abated.
  • If denied: You can appeal administratively (Publication 5) or request help from the Taxpayer Advocate Service if the IRS process causes a financial hardship.

Reference: Taxpayer Advocate Service — https://www.irs.gov/advocate

Common pitfalls and how to avoid them

  • Assuming automatic approval: FTPA is discretionary and based on your compliance history and the facts you present.
  • Failing to file all required returns: If prior returns are missing, FTPA can be denied. File missing returns promptly.
  • Not arranging payment: For failure-to-pay penalty relief, the IRS expects either payment in full or an approved arrangement (installment agreement) to stop continued penalty accrual.
  • Confusing penalty abatement with interest abatement: Abatement of penalties doesn’t automatically remove interest; interest can be harder to abate.

See also: “How to Challenge a Penalty: Building a Reasonable Cause Argument” for situations where FTPA is unavailable and you must prove reasonable cause.

Internal resource: How to Challenge a Penalty: Building a Reasonable Cause Argument — https://finhelp.io/glossary/how-to-challenge-a-penalty-building-a-reasonable-cause-argument/

Alternatives if FTPA is unavailable

  • Reasonable cause relief: Provide facts showing you exercised ordinary business care and were unable to comply. This requires documented evidence and a persuasive explanation.
  • Offer in Compromise: In rare cases where taxpayers cannot pay, an OIC may reduce overall liability, including penalties and interest under certain conditions.
  • Installment agreement: Entering an IRS installment agreement reduces ongoing failure-to-pay penalties and avoids enforced collection actions.

Internal guides: “Options to Reduce Penalty Assessments for Reasonable Cause” and “How to Request Penalty Abatement for Reasonable Cause” (see site glossary).

Real-world examples (brief)

  • Medical emergency: Taxpayer with no penalties in prior three years missed the filing deadline due to hospitalization. FTPA approved after submitting hospital records and prior-year transcripts.
  • Cash-flow lapse for small business: Employer missed payroll deposit once after a bank error. Business qualified for FTPA for that single period after proving a clean prior record and correcting the deposit.

(These are anonymized examples based on common case patterns observed in tax practice.)

Final tips from a practitioner

  • Act quickly: The sooner you verify eligibility and submit a request, the better — particularly if you’ve already paid the penalty and require a refund.
  • Keep a clear paper trail: Organized documentation speeds decision-making and strengthens appeals.
  • Use a qualified representative: A CPA, enrolled agent, or tax attorney can trim processing time, present a stronger case, and handle appeals.

Resources and next steps

Internal FinHelp resources (recommended):

Professional disclaimer: This article is educational and does not substitute for personalized tax advice. For specific guidance, consult a qualified tax professional about your facts and circumstances.

(Last reviewed: 2025)