First-Time Abatement (FTA) — Complete Practitioner Guide

What Is First-Time Abatement?

First-Time Abatement (FTA) is an administrative waiver that allows the IRS to remove failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers who have a clean compliance history. Unlike reasonable cause abatement, FTA does not require the taxpayer to demonstrate any specific reason for the failure — it is available simply because the taxpayer has a good prior compliance record.

FTA is authorized under IRM 20.1.1.3.6.1 as part of the IRS's administrative penalty relief policy. It is not codified in the Internal Revenue Code, which means it is entirely discretionary — but in practice, the IRS approves FTA requests at approximately 80% of the time when the taxpayer meets the eligibility criteria.

FTA is available for the following penalty types: (1) Failure to file under IRC §6651(a)(1) — 5% per month, up to 25% of unpaid tax; (2) Failure to pay under IRC §6651(a)(2) — 0.5% per month, up to 25% of unpaid tax; (3) Failure to deposit under IRC §6656 — 2% to 15% of the undeposited amount depending on timing. FTA is not available for accuracy-related penalties, fraud penalties, or information return penalties.

How to Request First-Time Abatement

FTA can be requested by phone, in writing, or through the IRS Online Account. The phone method is the fastest and most effective for most practitioners.

Phone request procedure: Call the IRS at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). When connected to a representative, state: "I am calling to request First-Time Abatement for the [penalty type] penalty on [client's name and SSN/EIN] for tax year [year]. My client meets all three FTA eligibility criteria: no penalties in the prior three years, all returns are filed, and the tax has been paid [or is in an installment agreement]." The representative will verify eligibility in real time and typically approve the abatement during the call.

Written request procedure: Send a letter to the IRS service center that issued the penalty notice. The letter should: (1) identify the taxpayer by name, SSN/EIN, and tax year; (2) identify the specific penalty notice (CP2000, CP14, etc.); (3) explicitly request FTA; (4) state that the taxpayer meets all three eligibility criteria; and (5) request confirmation in writing. Include a copy of the penalty notice. Allow 30-60 days for a written response.

IRS Online Account: Taxpayers (or practitioners with POA) can request FTA through the IRS Online Account at irs.gov. This method is increasingly available but may have limitations for certain penalty types.

Case Study: FTA for a Small Business Owner

Client profile: Jennifer K., owner of a small retail business. She received a CP162 notice assessing a $4,200 failure-to-deposit penalty for payroll taxes in Q3 2025. The penalty arose because Jennifer's bookkeeper made a deposit timing error — deposits were made 3 days late due to a bank processing issue.

FTA eligibility check: (1) No penalties assessed in 2022, 2023, or 2024 — confirmed by pulling IRS transcript; (2) All payroll returns (Form 941) filed on time; (3) All deposits made (though late). Jennifer met all three criteria.

Abatement request: The practitioner called the IRS Business line, identified as Jennifer's authorized representative under Form 2848, and requested FTA for the IRC §6656 failure-to-deposit penalty. The IRS representative confirmed eligibility and approved the abatement in 12 minutes. The $4,200 penalty was removed in full.

Additional savings: The practitioner also identified that interest had accrued on the penalty under IRC §6601. Once the penalty was abated, the associated interest was automatically removed as well — an additional $340 in savings.

Practitioner fee: The practitioner charged $350 for the FTA request — a 10-minute phone call that saved the client $4,540 (penalty plus interest). This is one of the highest ROI services a tax professional can offer.

FTA for Multiple Years and Stacking Strategy

A common misconception is that FTA is limited to one tax year. In fact, FTA can be obtained for multiple years as long as each year independently meets the eligibility criteria. However, because FTA requires no penalties in the prior 3 years, it can typically only be obtained for one year at a time — once a penalty is assessed for Year 1, it disqualifies Year 2 from FTA eligibility.

The stacking strategy: When a client has penalties for multiple years, practitioners can maximize abatement by: (1) requesting FTA for the earliest year first (which typically has the largest penalty due to the longer accrual period); (2) after FTA is granted for Year 1, requesting reasonable cause abatement for Year 2 and subsequent years. This approach is sometimes called "stacking" because it combines FTA and reasonable cause to maximize total penalty relief.

Reasonable cause arguments for subsequent years: After FTA is exhausted, practitioners can argue reasonable cause for subsequent years based on: reliance on a tax professional (IRC §6664(c)); serious illness or incapacitation; natural disaster or casualty; inability to obtain records; or death of a close family member. The standard is "ordinary business care and prudence" — the taxpayer must show they exercised reasonable care but still failed to comply.

Frequently Asked Questions