First Time Abate: how the IRS applies its one-time penalty waiver

What FTA is and what it covers

The IRS describes an administrative waiver as relief it grants by policy rather than by statute: the IRS “may formally interpret or clarify a provision to provide administrative relief from a penalty that would otherwise be assessed” (IRM 20.1.1.3.3.2). First Time Abate is the best known of these. It was “implemented in 2001 for tax periods with ending dates after December 31, 2000” and is “available for penalty relief the first time a taxpayer is subject to one or more of the referenced penalties for a single return filed by the taxpayer” (IRM 20.1.1.3.3.2.1).

The IRM lists exactly which penalties qualify:

The IRS's own FTA page (reviewed October 2026) adds a transition: FTA “is transitioning to a new relief called Automatic Exemption from Penalty (AEP), starting Summer 2026.” Under AEP the same three penalties are not assessed in the first place when the return completes processing and the account shows three years (or 12 consecutive quarters) of timely compliance; it applies to 2025 tax year returns and later and 2026 quarterly returns and later, on Forms 1040, 1065 and 1120, Forms 940, 941, 943, 944 and 945, and Form CT-1. The IRS page says the taxpayer receives a letter explaining the penalties were not assessed and need not respond, and that a taxpayer who receives an assessed penalty but believes AEP should have applied should contact the IRS. Earlier periods, and penalties that post despite a qualifying history, still go through the FTA request described on this page.

Every other penalty is outside FTA. Accuracy-related penalties, estimated tax penalties, information return penalties and international information return penalties all need a different basis for relief. For the partnership and S corporation late-filing penalties see IRC 6698 and IRC 6699; for deposit penalties see the failure-to-deposit guide.

Where FTA sits in the relief order

IRM 20.1.1.3 tells employees to consider relief in a fixed order: correction of IRS error, statutory and regulatory exceptions, administrative waivers, then reasonable cause. Two consequences follow for practitioners.

First, fix the account before arguing about the penalty. The IRM says relief criteria apply only after the module “has been thoroughly analyzed and corrected”: a misapplied payment, an extension that did not post, or a tax adjustment can make a systemic penalty reverse on its own. A penalty caused by IRS error is not an FTA case, and the IRM tells employees not to use FTA where “there is clear and convincing evidence that the taxpayer did in fact comply”.

Second, the IRS applies FTA before reasonable cause even if the letter only argues reasonable cause. The IRM is explicit: “If FTA criteria are met, the FTA waiver will be applied before reasonable cause” and the taxpayer is told the penalty was removed for compliance history. A client with a strong reasonable cause story and a clean history cannot, in IRS processing, choose to keep FTA in reserve. Where a request for an FTA-eligible penalty arrives, the IRM tells the employee to check FTA “before requesting additional information” (IRM 20.1.1.3.5).

The eligibility test

IRM 20.1.1.3.3.2.1(4) sets three tests, all measured over the three years before the penalized period and all applied to the same type of return as the penalized one.

An exception rescues a client who looks noncompliant only because of a bad record: if later information shows the taxpayer was not required to file, or did comply, a module with a prior FTA or tolerance code is treated as compliant.

Joint and formerly joint filers. For individual returns the client must meet the test for every return they filed or were required to file as primary or secondary taxpayer in the lookback. If the penalized return is joint and the prior returns were not filed with the same two SSNs and filing status, “FTA criteria for both SSNs must be met.” A client who was the secondary taxpayer on a former spouse's joint return carries that history.

No current-compliance condition in the IRM. Older practitioner checklists add two more tests: that the client has filed, or extended, all currently required returns, and has paid or arranged to pay any tax due. Neither appears in the current text of IRM 20.1.1.3.3.2.1 (rev. 03-29-2023, as carried in IRM 20.1.1 rev. 11-25-2025). Paragraphs (4) through (7) are the complete criteria the IRM gives employees, and the IRM's own treatment of unpaid tax (below) assumes a balance can remain on the module when FTA is applied. An assistor who refuses FTA because the client owes for another year or has an unfiled return is adding a condition the IRM does not state; ask for the paragraph being applied.

Business returns. Paragraph (5) adds BMF disqualifiers: four or more failure-to-deposit waiver codes in the three-year history, a Form 1120 or 1120-S in the lookback filed late but not penalized (a related note is redacted), and an incomplete-return penalty under IRC 6698(a)(2) or 6699(a)(2), which FTA does not cover. For deposit penalties, any portion charged for EFTPS avoidance is not removable under FTA.

To test a client against these criteria before calling, pull account transcripts for the penalized year and the three prior years (see reading an account transcript) or use the FTA eligibility checker.

Returns and penalties FTA never covers

Paragraph (7) excludes returns with an event-based filing requirement, the daily delinquency penalty, and “Information reporting that is dependent on another filing”. The IRM's non-exhaustive list of returns where FTA does not apply:

• Form 706 and Form 709
• Form 990
• Form 1099 series information returns
• Form 8300
• Form 3520 and Form 3520-A
• Form 5471 and Form 5472 (IRM 20.1.9 has an exception)

IRM 20.1.2.2.4.1 repeats the point for Forms 706, 709 and 709-NA. A client with an information return penalty needs reasonable cause under Treas. Reg. 301.6724-1 instead; TIN Comply's reference site covers that standard in Reg. 301.6724-1 reasonable cause and the relief sequence in FTA and the relief order.

One period, not one penalty

FTA applies to a single tax period, and the IRM is clear that it is “not applicable based solely on a taxpayer’s first request for penalty relief.” The quarterly example in the IRM is the one practitioners meet most: a Form 941 filer compliant for three years who then incurs deposit penalties in all four quarters of the next year gets FTA for the first quarter only. The other three quarters need reasonable cause. If the same filer had penalties in the lookback years that were never contested, none of the four quarters qualifies.

The waiver is also “not penalty-specific.” Any unreversed penalty (other than an estimated tax penalty) on a lookback module, or any penalty reversed under codes 018, 020 or 021, disqualifies every penalty on the period under review. In the other direction, when FTA applies, it removes all eligible penalties on the module, not just the one the client asked about (IRM 20.1.1.3.5).

When tax is still unpaid

Full payment is not a condition of FTA, and neither is current compliance on other periods (see the eligibility test above). If the module still has a balance, the IRM tells employees to abate the failure-to-pay penalty under FTA using reason code 062, which leaves Master File free to keep computing the penalty on the unpaid tax, and to tell the taxpayer that “the FTP penalty will continue to apply to the unpaid tax.” Once the tax is paid, the additional accrual can be removed under the same waiver. If the tax is paid in full, or the client agrees to pay immediately on notice of the abatement, the IRS abates the full assessed amount.

When a penalty is abated, interest on it goes too: IRM 20.1.2.2.4 says that if the penalty is abated, “all interest charged on the penalty is abated as well.” Interest on the underlying tax is a separate matter (see interest abatement).

How to request it

No magic words are needed. The IRM says “Taxpayers are not required to specifically request penalty relief under the FTA waiver to be eligible for the waiver,” and that eligible penalties remaining after account corrections, or proposed in an examination, should be abated or suppressed when the criteria are met. In practice a request still speeds things up. The options:

1. By phone. FTA “does not carry any oral statement authority (OSA) threshold” (IRM 20.1.1.3.3.2.1(8)), so the dollar ceilings that limit oral reasonable cause requests do not apply. See penalty abatement by phone. You need a Form 2848 or other authorization on file to discuss the account.
2. In writing. A short letter identifying the taxpayer, the tax period, the penalty and its Code section, and asking for administrative waiver based on compliance history. See the FTA request letter template and how to write the request.
3. On Form 843. Required in substance when the penalty has been paid, because a request to get paid money back is a claim for refund and must meet the IRC 6511(a) deadline: within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later (the Form 843 instructions repeat the rule). An FTA request filed after that window can abate only an unpaid balance. On Form 843 (Rev. Dec. 2024) enter the penalty's Code section on line 6 and check box c on line 7, “Reasonable cause or other reason allowed under the law can be shown.” Form 843 for penalties goes to the service center where the client would file a current return for that tax, or to the return address on the notice when responding to one (Form 843 instructions, Rev. Dec. 2024). See Form 843 and refund claims for paid penalties.
4. During an exam or collection case. Ask the examiner or revenue officer directly. The IRM treats penalties being proposed in an examination the same way.

The IRS will accept information from a representative without a power of attorney but will not discuss the account (IRM 20.1.1.3). When the waiver is granted, the IRS letter says the penalty was removed because of good compliance history; the IRM's sample paragraph adds “This type of penalty removal is only available one time.”

If the IRS says no

IRM 20.1.1.3.5.3 requires written notice of any denial, whether the request was made in person, by phone or in writing, with “A complete explanation of the IRS’s decision and the basis for denial” and the appeal procedures. The standard letters are Letter 854C, used by campuses, and, when the Reasonable Cause Assistant generated the determination, Letter 852C for business accounts and Letter 853C for individual accounts; Collection uses Pattern Letter 2413(P). The IRS's penalty appeal page says the appeal request is generally due 30 days from the date of the rejection letter, and to use the deadline printed on the letter. Check the reason against the criteria above: the most common errors are a lookback module under a different SSN, a prior-year penalty that was later reversed for IRS error, or a penalty that was never assessed with a notice. A second request with new information gets reconsidered; a request without new information is either refused or, if the client asks for an appeal, transferred to Appeals (IRM 20.1.1.3.5.1). See appealing a penalty abatement denial.

Questions practitioners ask