IRS First Time Abate (FTA) Policy: Complete 2026 Guide

First Time Abate (FTA) is an administrative waiver the IRS provides to taxpayers who have a clean compliance history. Under Internal Revenue Manual (IRM) 20.1.1.3.6.1, the IRS will remove certain penalties for taxpayers who meet specific criteria—even without demonstrating reasonable cause.

Key Point: FTA is not a law passed by Congress. It's an internal IRS policy designed to encourage voluntary compliance by giving first-time offenders a second chance.

The policy recognizes that even compliant taxpayers can make mistakes, and penalizing them harshly for a first-time error may be counterproductive to the tax system's goals.

The IRS evaluates First Time Abate eligibility against three specific requirements outlined in IRM 20.1.1.3.6.1. All three must be satisfied simultaneously—failing any single requirement disqualifies the request. Understanding each requirement in detail is essential for assessing whether FTA relief is available for a given tax period.

These requirements function as a bright-line test. Unlike reasonable cause, which involves subjective judgment, FTA eligibility is largely objective. IRS customer service representatives can verify all three requirements through their internal account systems during a phone call, which is one reason FTA decisions are often made on the spot.

FTA is limited to specific penalty types. Understanding which penalties qualify—and which do not—prevents wasted effort and helps focus penalty relief strategies appropriately.

Penalties Eligible for FTA:

Failure to File (IRC §6651(a)(1)): This penalty applies when a tax return is submitted after the due date (including extensions). The rate is 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25%. FTA can remove this penalty entirely for a qualifying tax period.

Failure to Pay (IRC §6651(a)(2)): This penalty applies when the tax shown on a return is not paid by the due date. The rate is 0.5% of the unpaid tax per month, up to 25%. The rate increases to 1% per month if the IRS issues a levy notice and the tax remains unpaid 10 days after the notice. FTA can remove this penalty as well.

Failure to Deposit (IRC §6656): This penalty applies to employers who fail to make timely employment tax deposits. The penalty ranges from 2% to 15% depending on how late the deposit is made. FTA relief applies to this penalty for qualifying taxpayers.

• Penalties NOT Eligible for FTA:
• Accuracy-related penalties (IRC §6662): Negligence, substantial understatement, and valuation misstatements require reasonable cause or substantial authority defenses
• Fraud penalties (IRC §6663): Intentional tax evasion carries a 75% penalty and falls outside FTA scope
• Estimated tax penalties (IRC §6654/6655): These underpayment penalties for individuals and corporations cannot be removed through FTA, though they also do not disqualify future FTA requests
• Information return penalties (IRC §6721/6722): Late or incorrect W-2s, 1099s, and other information returns are not eligible
• International information return penalties: Forms 5471, 8865, 3520, and similar filings carry their own penalty structures outside FTA scope

Note on Interest: Interest is never part of FTA relief. Interest accrues automatically under IRC §6601. However, when a penalty is abated, the interest that accrued specifically on that penalty amount is also removed.

FTA can be requested through several channels, each with distinct advantages. The method chosen may affect the speed of resolution and the type of documentation needed.

An FTA denial does not exhaust all options for penalty relief. Several alternative paths remain available, and understanding them allows for an informed next step.

• 1. Request Reasonable Cause Consideration
• After an FTA denial, immediately requesting reasonable cause review is a standard approach. The IRS representative can evaluate reasonable cause during the same interaction. Common grounds include:
• Death, serious illness, or unavoidable absence
• Fire, casualty, or natural disaster
• Inability to obtain records
• Erroneous advice from the IRS or a tax professional
• Other circumstances demonstrating ordinary business care and prudence

• 2. Appeal the Decision
• If both FTA and reasonable cause are denied, the IRS Appeals process provides an independent review:
• File Form 12203 (Request for Appeals Review) within 30 days of the denial
• Appeals Officers have broader authority than front-line representatives
• The Appeals process is informal and does not require legal representation
• IRS Publication 5 explains appellate rights in detail

• 3. Pay and File a Refund Claim
• For taxpayers who want to preserve the right to judicial review:
• Pay the penalty in full to stop interest from accruing
• File Form 843 requesting a refund of the penalty
• If the IRS denies the refund claim, there is a 2-year window to file suit in U.S. District Court or the Court of Federal Claims
• This path is typically reserved for larger penalty amounts where the cost of litigation is justified

4. Taxpayer Advocate Service (TAS) If normal IRS channels have not resolved the issue and the taxpayer is experiencing economic hardship or a systemic problem, the Taxpayer Advocate Service (Form 911) can intervene on the taxpayer's behalf.

Important Note: A denial letter from the IRS often reveals which specific requirement was not met. This information helps determine whether the issue can be corrected (e.g., filing an outstanding return) and the request resubmitted.

Both First Time Abate and reasonable cause can result in full penalty removal, but they operate under different frameworks and have different strategic implications. Understanding the distinction helps in choosing the optimal approach for a given situation.

• First Time Abate:
• Based on IRS administrative policy (IRM 20.1.1.3.6.1), not statute
• Requires a clean 3-year penalty history—no substantive explanation of circumstances is needed
• Does not require documentation beyond what the IRS already has on file
• Limited to failure-to-file, failure-to-pay, and failure-to-deposit penalties
• Binary eligibility: either the three requirements are met or they are not
• Can typically be resolved in a single phone call

• Reasonable Cause:
• Based on statute (IRC §6651(a)) and Treasury Regulations (Treas. Reg. 301.6651-1)
• Requires demonstrating "ordinary business care and prudence"
• Requires documentation such as medical records, disaster declarations, or professional correspondence
• Applies to a broader range of penalties, including accuracy-related penalties under IRC §6662
• Involves subjective IRS judgment—two examiners may reach different conclusions
• May require written submission and longer processing time

General Approach: The common strategy is to request FTA first because it is simpler, faster, and does not require disclosing personal circumstances. If FTA is denied, reasonable cause serves as a fallback. A combined request can be framed as: "I request penalty abatement under First Time Abate per IRM 20.1.1.3.6.1. In the alternative, I request abatement based on reasonable cause due to [specific circumstances]."

• When Reasonable Cause May Be More Appropriate First:
• In some situations, leading with reasonable cause may be the better approach:
• When the taxpayer does not have a clean 3-year penalty history, making FTA denial certain
• When the taxpayer has strong documentation (e.g., a FEMA disaster declaration) and may want to preserve FTA eligibility for a future tax year
• When the penalty type is not covered by FTA (e.g., accuracy-related penalty under IRC §6662)

Strategic Consideration: Using FTA "consumes" the clean compliance history for that rolling 3-year window. If a taxpayer has penalties in multiple years, it may be advantageous to use FTA for the year with the largest penalty and pursue reasonable cause for smaller penalties, preserving the maximum financial benefit.

*This information is for general educational purposes. Penalty relief outcomes depend on individual circumstances.*

The Internal Revenue Manual (IRM) is the IRS's internal operating guide—the playbook that IRS employees follow when making decisions about taxpayer accounts. IRM 20.1.1.3.6.1 is the specific section governing First Time Abate, and understanding its language provides insight into how IRS representatives evaluate FTA requests.

Where the IRM Section Fits:

• IRM 20.1.1.3.6.1 sits within the broader penalty administration chapter (IRM 20.1.1). The hierarchy is:
• IRM 20: Penalty and Interest
• IRM 20.1: Penalty Handbook
• IRM 20.1.1: Introduction and Penalty Relief
• IRM 20.1.1.3: Penalty Relief — Reasonable Cause
• IRM 20.1.1.3.6: Other Bases for Relief
• IRM 20.1.1.3.6.1: First Time Abate (FTA)

Key Provisions in Plain Language:

The IRM instructs IRS employees to consider FTA before reasonable cause. This means that when a taxpayer contacts the IRS to request penalty relief, the representative is directed to check FTA eligibility first—even if the taxpayer does not specifically mention it. In practice, however, not all representatives follow this instruction consistently, which is why explicitly requesting FTA by name remains important.

The IRM specifies that FTA is an "administrative waiver," not a statutory provision. This distinction matters because the IRS could theoretically modify or eliminate FTA through internal policy changes without Congressional action. However, FTA has been in effect since 2001 and has become a well-established part of IRS penalty administration.

The "Multiple Penalties Per Period" Question:

A common question involves whether FTA can remove multiple penalties on the same return. For example, if a taxpayer has both a failure-to-file and a failure-to-pay penalty for the same tax year, the IRM permits FTA to apply to both penalties for that single tax period, provided all three requirements are met. This is because FTA eligibility is evaluated per tax period, not per penalty type.

Compliance History Evaluation:

• The IRM directs representatives to examine the "three tax years preceding the tax year for which relief is requested." The IRM further clarifies that:
• Only penalties under IRC §6651 and §6656 are evaluated during the lookback
• Estimated tax penalties under IRC §6654 and §6655 are specifically excluded from the lookback
• The evaluation is per entity—an individual's penalty history is separate from a business entity's history, even if the same person owns the business

IRM Updates and Accessibility: The IRM is updated periodically, and the IRS publishes current IRM sections on irs.gov. The specific text of IRM 20.1.1.3.6.1 can be reviewed there. Any changes to FTA policy would be reflected in IRM updates, making it a useful reference to consult when preparing a penalty relief request.

*Note: The IRM is not law—it is internal IRS guidance. This section provides an educational summary of IRM provisions. Tax outcomes depend on individual circumstances, and the information here is for general educational purposes only.*