IRS First Time Penalty Abatement (FTA) & Automatic Relief in 2026

If you opened an IRS notice and found a penalty charge you weren't expecting, you are not stuck paying it without question. The IRS offers several paths to remove or reduce penalties, and the most accessible one for taxpayers with a clean recent history is first time penalty abatement.

Quick answer: Can I get my IRS penalties removed?

Yes. Many taxpayers can get IRS penalties reduced or removed through first time abatement and other penalty relief options. Here is what you need to know right now:

• First time abatement can remove certain failure to file, failure to pay, and failure to deposit penalties for one tax year if you have a clean three-year compliance history.

• Starting with tax year 2025 returns processed in 2026, the IRS will automatically apply penalty relief for many eligible taxpayers without requiring a phone call or letter. Roughly one million taxpayers are expected to receive this automatic relief.

• Penalties on older tax years (2024 and earlier) still require you to request penalty abatement by phone or mail.

• Only three types of penalties qualify for first time abatement. Estimated tax penalties, accuracy related penalties, and fraud-related penalties are not eligible.

• ClearNotice helps taxpayers decode IRS notices (CP14, CP501, CP504, and others), identify which penalties appear on the letter, and decide whether to request FTA or pursue another relief path.

What is IRS first-time penalty abatement?

First time penalty abatement is an administrative waiver the IRS first created in 2001 and one form of tax penalty abatement. It removes one set of qualifying penalties for a single tax period if the taxpayer meets specific compliance criteria. The policy applies to tax periods beginning after December 31, 2000, so most current individual and business penalties can be considered.

• FTA can waive penalties for failure to file, failure to pay, or failure to deposit (for payroll tax returns and certain business returns).

• FTA does not erase the underlying tax you owe. It only removes the penalty itself and any interest that accrued on that penalty.

• First-time penalty abatement applies to one tax period only. You cannot use a single FTA request to clear penalties across multiple years.

• Before the 2026 automatic changes, FTA was "by request only." You had to call or write the IRS to receive it.

Which IRS penalties qualify for first-time abatement?

Not every IRS penalty qualifies. The program covers three specific penalty types, and everything else falls outside its scope.

Qualifying penalties include:

• Failure to file penalty on Form 1040, partnership returns, and S-corporation returns (IRC §6651(a)(1), §6698, §6699).

• Failure to pay penalty on income tax balances shown on the return or required by notice (IRC §6651(a)(2) and (a)(3)).

• Failure to deposit penalty for payroll and employment tax deposits (IRC §6656). This covers employers who deposit taxes late or in incorrect amounts.

Non-qualifying penalties include:

• Estimated tax penalty (IRC §6654). These have their own waiver procedures, typically handled through IRS Form 2210.

• Accuracy related penalties assessed during audits (IRC §6662), such as the 20% penalty for substantial understatement.

• Fraud-related penalties.

• Information return penalties (late 1099s, incorrect W-2s) and daily delinquency penalties.

FTA does not apply to estimated tax penalties, accuracy-related penalties, or fraud-related penalties.

Concrete example: You filed a 2023 Form 1040 three months late and owed $8,000 in tax. The IRS assessed both a late filing penalty and a failure to pay penalty. If your 2020, 2021, and 2022 returns were filed on time with no penalties, you could request FTA to remove both the failure to file and failure to pay penalties for 2023.

Eligibility rules: who can use first-time abatement?

Eligibility for first time abatement is based on your recent filing compliance and payment history, not your income level or the size of your tax obligation.

The IRS reviews compliance history for penalty abatement eligibility using the following criteria:

• You must have filed all required returns for the past three years (or had valid extensions in place). If a return was not required in a given year, that year does not count against you.

• No penalties in the last three years qualify for first time abatement if those penalties remain unreversed on your account. Penalties removed for reasonable cause or IRS error do not count against you.

• The current-year tax return that triggered the penalty must now be filed or be under a valid extension.

• You must have paid the underlying tax in full or be on an approved IRS payment plan (such as an installment agreement).

• Small estimated tax penalties alone do not disqualify you.

• A clean compliance history is required for penalty abatement.

Example: For a penalty on your 2025 tax year return, the IRS will check your filing and payment records for 2022, 2023, and 2024. If all three years show timely filing, timely payment, and no qualifying penalties, you meet the lookback requirement.

You must be in good standing with any outstanding tax balances. That means either paid in full or covered by an approved payment plan.

Automatic FTA and new automatic penalty relief starting in 2026

On July 8, 2026, the IRS announced a new program called Automatic Exemption from Penalty (AEP) through IR-2026-83. Starting in 2026, FTA will be automatically applied for qualifying taxpayers on newer returns, replacing the manual request process.

Key timeline details:

• Summer 2026: AEP begins processing. The IRS applies automatic FTA to eligible 2025 tax year returns and certain 2026 quarterly returns during original return processing.

• January 1, 2027: For original returns with due dates on or after this date, AEP fully replaces FTA. The manual FTA request process no longer applies to these returns.

• During the transition (summer 2026 through early 2027), some 2025 returns processed before AEP started and certain 2026 quarterly returns processed early will still rely on traditional FTA by request.

The IRS can automatically waive qualifying penalties for eligible taxpayers with good compliance history. Under AEP, the system prevents certain penalties from being assessed during return processing. If you qualify, you will never see the penalty on your account.

The AEP program requires timely filing and payment history for relief: three consecutive clean tax years for annual returns, or 12 consecutive clean quarters for quarterly payroll tax returns.

The automatic system covers only newer tax years. If you have penalties from 2022, 2023, or 2024, you still need to request relief the traditional way. IRS guidance and Internal Revenue Manual updates (IRM 20.1.1, updated June 17, 2026) continue to refine these rules, so a tax professional or tax advisor tracking IRS news releases will have the latest details.

According to the Journal of Accountancy, about one million taxpayers are expected to receive automatic penalty relief under this program for tax year 2025 returns.

How first-time abatement interacts with your IRS account

All penalties and abatements appear line by line on your IRS account transcripts. Understanding what your transcript shows before you request abatement can save you from a wasted call or letter.

• Create or log in to your IRS online account to view current balances, penalty assessments, and payment history.

• Order account transcripts for at least the last four tax years. These transcripts confirm which penalties were charged, whether any were reversed, and whether FTA was already used for a prior tax period.

• The IRS tracks penalty reason codes (such as PRC 018 for FTA). If your transcript shows a prior FTA within the three-year lookback, the IRS will not grant a second one for the same return type.

• Once an automatic FTA or manual abatement posts, the transcript shows a "reversal" or "abatement" entry on the penalty line with a posting date.

ClearNotice can help you interpret the penalty lines on IRS notices like CP14 or CP161 and understand how those charges map to your IRS account. That clarity matters before you file an abatement request.

Step-by-step: how to request first-time penalty abatement

For penalties on 2024 and earlier returns, you generally must ask the IRS for FTA. For many 2025 penalties and later, relief may be automatic. Here is how to request FTA when it is not automatic.

By phone:

• Call the toll free number printed on your IRS notice. For individual notices like CP14, this is typically 800-829-1040.

• Tell the IRS representative you want to request first time abatement for the penalty on the listed tax year.

• Have ready: your IRS notice, your filing dates for the prior three years, your payment confirmation, and your Social Security number.

• Simple failure to file and failure to pay penalties on a straightforward individual return are often approved during the call. You can request penalty relief by calling the IRS directly.

By mail:

• Send a short written statement referencing your name, SSN, the tax year, and the IRS notice number.

• State that you meet FTA criteria and that your prior three years are clean.

• Mail the letter to the IRS address shown on your notice, not to a generic IRS address.

By Form 843:

• Form 843 is commonly used to request tax penalty abatement when you want removal of assessed penalties or a refund after you have already paid.

• The form works well for complex situations involving multiple tax years, business or payroll penalties, or overlapping reasonable cause claims.

You can request penalty relief within three years of the due date of the return (or two years from the date the penalty was paid, whichever is later). The IRS does not guarantee a timeline for penalty relief approval; phone requests are generally faster than mail.

Sample first-time abatement letter and Form 843 guidance

This section covers what an effective FTA letter or Form 843 submission should contain.

Elements of an FTA letter:

• Your name, address, SSN or EIN, and the specific tax year (e.g., 2023) at the top.

• The exact IRS notice number (CP14, CP162, Letter 525, etc.).

• A clear statement: "I am requesting first time penalty abatement for the failure to file penalty and/or failure to pay penalty for tax year [year]."

• Confirmation that you had no disqualifying penalties for the prior three tax years and that all required returns are filed.

• If you already paid the penalty, a statement requesting a refund of the penalty and related interest.

• Your signature and the date. Keep copies of everything for at least three years.

Key Form 843 fields:

• Check the box for "Interest, Penalty, and Additions to Tax."

• Specify the penalty type, such as "failure to file penalty under IRC §6651(a)(1)."

• Enter the exact tax period (e.g., "12/31/2023" for a 2023 Form 1040).

• In the explanation section, state you are eligible for first time abatement and list the clean years you are relying on (e.g., "2020, 2021, 2022: all returns filed on time, no penalties assessed").

Mail the form or letter to the IRS address printed on your penalty notice. Attach copies of relevant notices; never send originals.

What if you do not qualify for first-time abatement?

Many taxpayers who cannot use FTA still have other ways to seek relief from penalties. Here are the main alternatives.

• Reasonable cause penalty relief: If you can show circumstances beyond your control prevented timely filing or payment, such as serious illness, natural disasters, a house fire that destroyed records, or reliance on incorrect advice from a tax advisor, you can request reasonable cause relief; the IRS also looks at whether you exercised ordinary care in trying to meet the filing or payment obligation. This requires a reasonable cause letter with documentation (medical records, insurance claims, written correspondence with the advisor). The IRS evaluates these on a case by case basis, looking at whether you exercised ordinary business care and acted in good faith.

• Statutory exception: If you relied on written IRS advice that turned out to be wrong, or if penalties were waived in a federally declared disaster zone, a statutory exception may apply.

• IRS administrative waivers: The IRS occasionally announces broad relief for specific tax years or filing seasons.

• Payment plans: An installment agreement does not remove existing penalties, but entering one stops additional failure to pay accrual on some balances and prevents collections.

• Accuracy related penalties from audits (the 20% penalty under IRC §6662) are rarely eligible for FTA but may be challenged through reasonable cause, reliance on a tax professional, or IRS Appeals.

• Estimated tax penalties have their own waiver procedures via IRS Form 2210, separate from FTA or reasonable cause in most cases.

If the IRS denies your penalty relief request, a denial letter will explain the reason. You can appeal a denied penalty relief request within 30 days of the denial letter by contacting IRS Appeals.

ClearNotice can help you read your IRS letter to determine which type of penalty you have, so you can pick the correct tax law steps for your tax situation.

Interest relief: what happens to interest when penalties are abated?

Interest and penalties are separate charges on your IRS account. The IRS charges interest on both unpaid tax and on most penalties until fully paid.

• When a penalty (failure to file, failure to pay) is removed through FTA or reasonable cause, the related interest charged on that specific penalty is also reversed.

• Interest on the underlying tax debt itself usually cannot be removed unless the IRS made an error or caused an unreasonable delay in assessing the correct tax.

• IRS interest rates are set quarterly and compound daily. Leaving a tax balance unpaid after abatement will keep interest growing on that balance.

Example: You filed a 2023 Form 1040 late and owed $5,000 in tax. The IRS assessed a $750 failure to file penalty plus interest on both the tax and the penalty. If FTA removes the $750 penalty, the interest charged on that $750 also disappears. But you still owe $5,000 plus whatever interest accrued on the $5,000 itself until you pay tax in full.

In rare cases, interest relief under IRC §6404(e) may apply when the IRS caused an unreasonable delay in making an assessment. That is a separate process from FTA.

Future penalties: can you use first-time abatement more than once?

FTA is not a once-per-lifetime benefit. You can use it again, but only after rebuilding a clean compliance history.

• FTA can only remove penalties for one tax period at a time. After using it for, say, tax year 2025, you need three consecutive penalty-free years (2026, 2027, 2028) before the IRS will grant FTA again on the same return type.

• The next eligible year in that example would be 2029, assuming timely filing and timely electronic filing or paper filing, full payment, and no qualifying penalties in those intervening years.

• Separate return types maintain separate histories. Using FTA for an individual Form 1040 does not block future FTA for an employment tax Form 941, as long as each module's compliance record is clean.

• You can only request abatement for one tax period at a time. If you have penalties on two different years, each requires its own request and its own eligibility check.

Treat FTA as a safety net for an occasional slip, not as a recurring planning tool. Repeated late filing or late payment narrows your relief options and can trigger additional IRS scrutiny.

Common mistakes that weaken an abatement request

Many FTA and reasonable cause requests are delayed or denied because of avoidable errors. Here are the most common:

• Asking for FTA before filing all missing prior-year returns. The IRS will automatically deny the request if your filing compliance for the lookback period is incomplete.

• Requesting abatement for penalties that do not generally qualify under FTA (such as accuracy related penalties or estimated tax penalties) without citing an appropriate alternative basis like reasonable cause.

• Using the wrong IRS address or omitting the notice number, which prevents the IRS from matching the request to the right IRS account.

• Assuming penalties and interest stop accruing once you mail a letter. They continue until the IRS posts an abatement or the tax is fully paid.

• Writing emotional narratives instead of concise facts. The IRS looks for filing dates, payment dates, and clean compliance records. A short, factual written statement works better than three pages of explanation.

• Failing to verify transcripts. If FTA has already been used for that tax period or return type within the lookback, your request will be denied.

ClearNotice can help you read your IRS letter to avoid mixing up penalty types or due date details when preparing your penalty relief requests.

How ClearNotice fits into your penalty and abatement strategy

ClearNotice is a digital service that decodes IRS notices and explains penalties, filing deadlines, and response options in plain English. Here is how it connects to first time penalty abatement and penalty relief:

• Upload IRS letters (CP14, CP501, CP503, CP504, and others) to see exactly which penalties have been assessed, for which tax year, and the due date for response.

• The tool highlights key dates, including the original filing deadline, the notice date, and any response window, so you know when to act on an abatement request.

• ClearNotice identifies whether a penalty is the type that may qualify for first time abatement, reasonable cause, or another relief category, helping you request relief through the right channel.

• It summarizes the main steps to call the IRS or draft a simple FTA waiver request, tailored to the specific notice you received.

ClearNotice does not replace a tax professional. It gives you clarity and confidence before you call the IRS or speak to a tax advisor. The next time an IRS notice arrives, run it through ClearNotice to spot FTA opportunities early and avoid the common mistakes that weaken penalty relief requests.