First-Time Penalty Abatement (FTA)
Authority: IRM 20.1.1.3.3.2.1
First-time penalty abatement is an administrative waiver the IRS grants almost automatically to taxpayers with a clean compliance history, removing failure-to-file, failure-to-pay, and failure-to-deposit penalties for a single tax period. The requirements are mechanical: no penalties (other than an estimated tax penalty) in the prior three years, all currently required returns filed or extended, and any tax due paid or on an active payment plan. FTA does not require proving reasonable cause, which makes it the first tool to reach for, and a simple phone call to the IRS or a short letter is usually enough. It does not apply to accuracy-related penalties or the estimated tax penalty. Strategy matters: because FTA burns the clean-history credit on one period, it should be applied to the period with the largest penalty, and reasonable cause arguments saved for the others.
Example
A business files its 1120-S three months late, generating a late-filing penalty of over $2,400. Because it filed and paid cleanly for the prior three years, one call requesting first-time abatement removes the entire penalty.
Related terms
Estimated Tax Penalty
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Filing Extension
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Amended Return
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