What is first-time penalty abatement?
First-time penalty abatement, which the IRS calls First Time Abate or FTA, is an administrative waiver that removes three specific penalties for a single tax period, on request, when your filing and penalty history for the three preceding years is clean. You do not have to explain why you were late. You do not have to show hardship. You have to qualify, ask, and ask correctly.
FTA covers the failure-to-file penalty (Internal Revenue Code section 6651(a)(1)), the failure-to-pay penalty (section 6651(a)(2) and (3)) and the failure-to-deposit penalty on employment taxes (section 6656). The late-filing penalties for partnership and S corporation returns (sections 6698 and 6699) are covered as well. It does not cover the accuracy-related penalty, the estimated-tax penalty, information-return penalties or any fraud penalty. It does not remove interest on the tax; interest charged on the penalty itself comes off automatically when the penalty does.
For many people with one bad year, FTA is the single most valuable thing they can ask the IRS for, and the IRS will not offer it unless you ask. This article covers who qualifies, how much is at stake, how to make the request and what Illinois does instead. If penalties are part of a larger balance, our tax debt relief page covers the rest.
How much are the penalties FTA can remove?
Late-filing and late-payment penalties compound faster than most people expect. The current rates, from the IRS's own penalty pages:
- Failure to file: 5 percent of the unpaid tax for each month or part of a month the return is late, up to 25 percent. If the return is more than 60 days late, the minimum penalty is the lesser of $525 (for returns due after December 31, 2025; $510 for returns due during 2025) or 100 percent of the tax.
- Failure to pay: 0.5 percent of the unpaid tax per month or part of a month, up to 25 percent. The rate drops to 0.25 percent while an approved installment agreement is in place if you filed on time, and rises to 1 percent if you do not pay within ten days of a notice of intent to levy.
- Both in the same month: the failure-to-file penalty is reduced by the failure-to-pay amount, so the combined charge is 5 percent (4.5 plus 0.5) per month for the first five months.
A worked example. You owed $20,000 with your 2025 return and filed and paid it six months late. Failure to file: five months at 4.5 percent, or $4,500. Failure to pay: six months at 0.5 percent, or $600. Penalties of $5,100 before interest. If you qualify for FTA, all $5,100 can be removed; the interest on the $20,000 cannot.
Who qualifies for first-time penalty abatement?
The IRS page and the Internal Revenue Manual (IRM 20.1.1.3.3.2.1) set three tests. All three must be met for the type of return that was penalized:
- Three clean filing years. You filed the same type of return on time for the three tax years before the penalized year (12 consecutive quarters for deposit penalties). A return filed within a valid extension counts as on time.
- Three clean penalty years. No penalties were assessed for those years, or any that were assessed were later removed for reasonable cause or IRS error. The estimated-tax penalty does not count against you. An earlier FTA in that window does count against you; the IRM treats it as a used waiver.
- For businesses, a deposit-penalty limit. The IRS did not waive a failure-to-deposit penalty four or more times in the prior three years.
The IRS also expects you to be current when you ask: all required returns filed, and the tax paid or in a payment plan. A failure-to-pay penalty keeps growing until the balance is paid, so the IRS often grants FTA on that penalty once the tax is paid or an installment agreement is in place.
Two consequences follow from the three-year look-back. FTA is a one-period fix: if you were late two years in a row, the second year will not have a clean history, and relief for it depends on reasonable cause. And the look-back makes FTA worth protecting; if you are weighing which year to request it for, the year with the largest penalty is usually the one.
How do you ask for first-time penalty abatement?
The IRS does not apply FTA on its own. The request is simple, but the order matters.
- Check the three prior years before you call. Pull account transcripts for each year through your IRS online account. If a penalty shows for any of them, you are into reasonable-cause territory and should prepare that case instead.
- Pay the tax, or set up a plan, if you can. This stops the failure-to-pay penalty from growing and removes the most common reason the IRS says "not yet."
- Call the number on the notice. Ask for first-time abatement under IRM 20.1.1.3.3.2.1 for the specific tax period. For many individual failure-to-file and failure-to-pay penalties the IRS can grant it on the call. Write down the date, the employee identification number and the result.
- Or ask in writing. Send Form 843, Claim for Refund and Request for Abatement, or a signed letter, to the address in the Form 843 instructions, one request per tax period, with a copy of the penalty notice. Use the written route if the penalty was already paid and you want it refunded, or if the phone representative declines.
- If FTA is denied, make the reasonable-cause case. The IRM directs IRS staff to consider FTA before reasonable cause, so a denial usually means a history problem. A reasonable-cause request can follow on the same form, and a written denial can be appealed to the IRS Independent Office of Appeals.
What if you do not qualify: reasonable cause
Reasonable cause is the other path, and it depends on facts. The IRS's examples: a fire, natural disaster or civil disturbance; death, serious illness or unavoidable absence of the taxpayer or an immediate family member; inability to obtain records; a system failure that blocked an electronic filing or payment. What does not count on its own: lack of money, not knowing the rules, a mistake, or relying on a preparer. The IRS asks for documentation with dates, such as medical records, court papers, insurance claims and correspondence.
| First-time abatement | Reasonable cause | |
|---|---|---|
| Basis | Clean three-year history | What happened and why it prevented compliance |
| Proof | Transcripts show it | Documents with dates |
| Penalties covered | Failure to file, pay and deposit | Those, plus accuracy-related and information-return penalties |
| How often | In effect once every four years per return type | As often as the facts support it |
| Interest on the tax | Stays | Stays |
A business owner with a Form 941 deposit penalty should look at both paths at once. FTA can clear one quarter; a reasonable-cause request can address the quarters around it. If the unpaid employment tax itself is still open, the penalty is the smaller problem, and our business tax attorney page explains the personal exposure that comes with it.
Does Illinois have first-time penalty abatement?
No. Illinois has no automatic waiver, but it has reasonable cause. Section 3-8 of the Uniform Penalty and Interest Act (35 ILCS 735/3-8) provides that late-filing and late-payment penalties "shall not apply if the taxpayer shows that his failure to file a return or pay tax at the required time was due to reasonable cause," and it lets you protest the penalty without protesting the tax. During an audit the request goes in writing to the auditor. After the liability is final, the route is a Board of Appeals petition, Form BOA-1, filed with the Illinois Department of Revenue Board of Appeals at 555 West Monroe Street, Suite 1100, Chicago, Illinois 60661 (312-814-3004). The Board can waive penalties and interest for reasonable cause and can reduce a liability it believes cannot be collected in full; it cannot redetermine the tax. Our Illinois Department of Revenue page and our article on IDOR audits cover the state process.
Why have a lawyer who is also a CPA make the request?
A phone call for FTA is something many people can do themselves, and this article is written so you can. The cases that call for help are the ones where the request opens a larger file: penalties across several years, a business with deposit penalties and possible personal liability for the trust-fund portion, a reasonable-cause story whose facts you would not want to put in a letter to the IRS without advice, or penalties that sit on top of unfiled returns that first have to be reconstructed. Hani H. Khatib, Attorney at Law · CPA · LL.M. (Taxation), coordinates the late returns, makes the penalty request and handles any appeal in one engagement, and the conversation about why the returns were late is protected by attorney-client privilege. What happens when you call is described on the tax attorney page, and our article on the IRS Fresh Start program puts penalty relief alongside the other options for an unpaid balance.
General information as of October 4, 2026; not legal advice; laws change; consult a lawyer about your situation.