Overview

Waivers and first-time penalty relief (often called “First-Time Abate” or FTA) give qualifying taxpayers a one-time break from certain IRS penalties. The relief is intended for taxpayers who generally comply with tax rules but have an isolated lapse — for example, missing a payment, filing late once, or failing to deposit employment taxes. The IRS describes penalty relief options on its official site and in guidance, and these processes remain active as of 2025 (IRS: Penalty Relief — https://www.irs.gov/payments/penalty-relief).

In my practice I’ve seen FTA reverse penalties worth hundreds to thousands of dollars, especially for taxpayers with clean compliance histories. This article explains who typically qualifies, how to request relief, documentation to prepare, realistic timelines, next steps if you’re denied, and common mistakes to avoid.

Who typically qualifies for first-time penalty relief?

  • You haven’t had penalties (for the same issue) in the prior three tax years. The IRS normally looks back three years of penalty history.
  • You have filed all required returns for the tax periods involved or have extensions in place.
  • You paid—or made arrangements to pay—the tax you owe (or are in an acceptable installment agreement).

Note: Some penalties aren’t eligible for FTA, and certain serious penalties (e.g., civil fraud penalties or trust fund recovery penalties) often are not covered. Always check the specific penalty type before assuming eligibility (IRS: Penalty Relief — https://www.irs.gov/payments/penalty-relief).

What penalties are commonly eligible?

  • Failure-to-file penalty (late filing)
  • Failure-to-pay penalty (late payment)
  • Failure-to-deposit (employment tax deposit) penalty

Less commonly eligible or excluded: accuracy-related penalties tied to fraud, civil fraud penalties, and certain penalties assessed after appeals or criminal tax cases. If you were previously granted relief for a similar penalty within the look-back period, you likely won’t qualify for another FTA for the same class of penalty.

How to request waivers and first-time penalty relief (step-by-step)

  1. Review the notice and confirm the penalty type and tax period. The IRS notice should list the reason for the penalty and the tax period. Don’t rely on memory—use the notice.

  2. Check eligibility. Verify you meet the FTA criteria: no similar penalties in the prior three years, all returns filed, and tax paid or arrangements made.

  3. Use the IRS online account when possible. The IRS allows many taxpayers to request penalty relief through the IRS Online Account (sign in at IRS.gov). For common situations, relief can be requested and documented electronically (IRS: Penalty Relief — https://www.irs.gov/payments/penalty-relief).

  4. If online isn’t available or you prefer paper, send a written request. Steps for a written request:

  • Address it to the contact shown on the IRS notice (the address or phone number appears on the notice).
  • State you are requesting first-time abatement or penalty abatement for the specific penalty code and tax period.
  • Briefly explain why you qualify (clean history, filed returns, paid/arranged payment).
  • Attach supporting documentation (proof of timely filing for other years, bank records showing payment or an installment agreement, medical records or disaster declarations if using reasonable cause). See the Documentation checklist below.

  1. For refund or abatement claims, you may use Form 843 (Claim for Refund and Request for Abatement) in some situations, but Form 843 is not required to request FTA in many routine cases. Use Form 843 only when IRS instructions specify it applies to your circumstance (see Form 843 instructions on IRS.gov).

  2. Call the IRS. If you’re listed as an individual on a notice, call the phone number shown. For business/employer penalty issues, call the Employer Services line or the number on the notice. Note call-center wait times can be long; keep records of the date, time, representative name/ID, and confirmation numbers.

  3. Track and follow up. If the IRS requests more documentation, provide it promptly and keep copies.

Documentation checklist

  • Copy of the IRS penalty notice.
  • Copies of prior-year tax returns (to show filing history).
  • Proof of payment (bank statements, IRS account transcripts, canceled checks).
  • For payments arranged: a copy of the installment agreement or direct debit confirmation.
  • If using reasonable cause in addition to FTA (e.g., illness, natural disaster), include supporting evidence: medical records, death certificate, insurance claim reports, or FEMA disaster declarations.
  • Business records for payroll deposit issues (payroll service records, bank statements, cash flow notes).

Sample abatement request letter (use as a starting point)

[Date]

Internal Revenue Service
[Address shown on notice]

Re: Request for First-Time Penalty Abatement
Taxpayer: [Name or Business Name]
Tax ID: [SSN or EIN]
Tax Period(s): [MM/YYYY – MM/YYYY]
Notice Number: [From IRS notice]

To whom it may concern:

I am writing to request first-time penalty abatement for the penalty assessed on [tax period]. I have a history of timely filing and payment for the prior tax years and meet the IRS criteria for First-Time Abate. I have filed all required returns for the periods in question and have paid or arranged payment for any tax owed. Enclosed are: a copy of the IRS notice, copies of my filed returns for prior years, and proof of payment/arrangement.

Please contact me at [phone/email] if you need additional documentation. Thank you for your consideration.

Sincerely,

[Signature]
[Printed name]

Adjust the letter to add reasonable cause details if appropriate (for example, medical emergency) and attach supporting evidence.

Timeline and likely outcomes

  • Automated FTA: For straightforward cases the IRS system may abate penalties automatically within weeks, especially if you request relief through your online account.
  • Manual review: Complex or documentation-heavy requests can take 60–120 days or longer. Expect at least several weeks.
  • Approval: If granted, the IRS will send a notice showing penalties removed and any interest adjusted. Interest on unpaid tax generally remains unless refunded via a claim for refund.
  • Denial: If denied, you will receive a notice explaining the reason and instructions for appeal.

If your request is denied: next steps

  1. Read the denial carefully and identify the reason.
  2. Provide additional evidence or clarify misunderstandings in a written response to the IRS contact shown.
  3. Request an appeal or penalty reconsideration if appropriate. The IRS Independent Office of Appeals can review penalty decisions in many cases; follow the appeal instructions on the IRS notice.
  4. Consider professional representation. Tax professionals can prepare and submit appeals and provide technical arguments like demonstrating reasonable cause.

Common mistakes to avoid

  • Waiting too long to act. Respond promptly to notices; delays reduce options.
  • Omitting key documents. If you claim a medical emergency or disaster, include credible supporting evidence.
  • Confusing FTA with reasonable cause. They’re different pathways: FTA is administrative and available when you meet strict criteria; reasonable cause requires demonstrating circumstances that prevented compliance.
  • Assuming all penalties qualify. Confirm whether the specific penalty code is eligible.

Practical tips from practice

  • Keep three years of filing and payment records accessible. The IRS often looks back three years when evaluating FTA.
  • Use the IRS Online Account if you can — it’s faster and provides a record of your request.
  • If you have multiple penalty types, request abatement for each one separately and explain the history for each.
  • If money is the issue, setting up an installment agreement before requesting abatement can improve your prospects for FTA since one requirement is that taxes are paid or arranged to be paid.

Related resources on FinHelp

Authoritative sources

  • IRS — Penalty Relief (includes First-Time Abate): https://www.irs.gov/payments/penalty-relief
  • IRS — Notice instructions and contact info: see the notice you received and the IRS website for current phone numbers and forms.

Professional disclaimer

This article is educational and based on IRS guidance current through 2025 and my professional experience. It is not tax advice for a specific situation. For individualized guidance, consult a licensed tax professional or contact the IRS directly.