How to Qualify for IRS First-Time Penalty Abatement and Waive Your Penalties

When life throws unexpected challenges your way, such as health issues, natural disasters or simple oversight, it’s easy to miss an IRS deadline and incur penalties. Thankfully, the IRS offers First-Time Penalty Abatement (FTA), an administrative waiver that forgives certain penalties the first time they occur. In this blog post, we’ll explain what FTA is, who qualifies, which penalties can be waived, and how to request relief in a few simple steps.

What is First-Time Penalty Abatement?

First-Time Penalty Abatement is a courtesy relief the IRS provides to taxpayers with a history of compliance who incur penalties for the very first time. Think of it as a “get-out-of-penalty-free” card. Rather than automatically enforcing late-filing, late-payment, or deposit penalties, the IRS will waive them if you meet the eligibility criteria, with no forms to prove your history or detailed explanations required.

Who qualifies for First-Time Penalty Abatement?

To take advantage of FTA, you need:

1. A clean compliance record. In the three tax years before the penalty year, you must have filed all required returns on time. You must not have any penalties (or only penalties later removed for reasons other than FTA).
2. Current filing and payment arrangements. You must have filed the return for which the penalty was assessed. Any tax you owe must be paid or have an installment agreement in place.

If you meet these conditions, the IRS will consider waiving eligible penalties without further proof of hardship.

Which penalties can be abated?

FTA applies to penalties assessed in a single tax period (one year for income taxes; one quarter for payroll taxes). Common penalties covered include:

• Failure-to-File Penalty for missing your return’s due date
• Failure-to-Pay Penalty for unpaid tax after filing
• Failure-to-Deposit Penalty for late or missing payroll tax deposits.

There is no cap on the amount the IRS can waive under FTA, and relief applies regardless of the penalty size.

How to Request First-Time Abatement

1. By Phone.
   Call the toll-free number on your IRS penalty notice and explain that you qualify for First-Time Penalty Abatement. The agent will verify your compliance history and, if eligible, remove the penalty.
2. In Writing
   Complete Form 843 (Claim for Refund and Request for Abatement) and include a brief statement: “I qualify for First-Time Penalty Abatement under IRS policy because I have timely filed and have no prior penalties in the past three years.”
   Mail the form and any payment (if needed) to the address on your notice.

If you request reasonable-cause relief instead, the IRS will automatically apply FTA if you qualify, then evaluate reasonable cause if you do not.

What happens to interest and ongoing penalties when you apply for abatement?

FTA removes only the penalties assessed up to the date you request relief. Any unpaid tax continues to accrue interest and additional penalties until paid in full. Once you pay off the balance, you can request FTA again to remove penalties that accumulated during the payment period. Read our article here that discusses what happens to interests and penalties when you get penalty relief.

Final Thoughts

First-Time Penalty Abatement is a powerful tool for taxpayers who, despite a history of compliance, find themselves facing an unexpected IRS penalty. By understanding the simple eligibility criteria and knowing how to request abatement either by phone or in writing, you can often eliminate penalties entirely. Remember, even if you haven’t paid your full tax balance, FTA can remove the penalties up to the date of your request, and you can always seek relief again after settling any remaining balance.

Maintaining a clean compliance record not only helps you qualify for future abatement but also minimizes stress and keeps your tax affairs in good order. If you ever run into trouble or have questions about navigating the abatement process, our team is here to guide you every step of the way. Don’t let penalties pile up and take advantage of First-Time Penalty Abatement and keep your tax record spotless. If you’re not sure how, chat with us at the Law Office of Steven N. Klitzner so we can help you prepare your abatement request and negotiate directly with the IRS on your behalf.