The failure-to-file and failure-to-pay penalties are among the harshest in the tax code, and together they can stack up to 47.5% of what you owe. But here’s a fact most people never learn: the IRS will often remove those penalties completely if you simply ask the right way. It’s called first-time penalty abatement, and it’s one of the most underused forms of tax relief out there.
What First-Time Penalty Abatement Is
First-time penalty abatement (FTA) is an administrative waiver the IRS grants to taxpayers with an otherwise clean history. You can use it to remove failure-to-file, failure-to-pay, and failure-to-deposit penalties. It won’t erase the underlying tax or the interest, but wiping out the penalties can shrink a five-figure balance dramatically.
Do You Qualify?
You generally qualify for FTA if you pass three tests. First, you filed all required returns, or had a valid extension, for the three tax years before the penalty year. Second, you had no other penalties for those same three years (an estimated-tax penalty doesn’t count). Third, you’ve paid or arranged to pay the tax you owe. If you’re already on an installment agreement, you’re most of the way there.
How to Request It
There’s no special form required. The fastest route is usually calling the number on your IRS notice and asking for first-time penalty abatement directly. To request relief from the failure-to-pay penalty, you can also file Form 843, Claim for Refund and Request for Abatement. Keep your penalty notice handy and be ready to explain your clean compliance history.
What If You Don’t Qualify?
If you don’t meet the clean-history test, don’t give up. You can still request penalty relief based on reasonable cause, such as serious illness, a natural disaster, or incorrect written advice from the IRS. It’s a higher bar than FTA, but it works in the right situations. Either way, the worst the IRS can say is no, and the savings are usually worth the phone call.