IRS Penalty Abatement: First Time Abate, Reasonable Cause, How to Ask
IRS penalty abatement is the removal or reduction of an IRS penalty. The IRS offers three types of relief: First Time Abate and other administrative waivers, reasonable cause, and statutory exceptions. A request can start with a call to the number on the notice or in writing on Form 843. Removing a penalty also reduces or removes its interest.
The rules changed in 2026: the IRS says First Time Abate is transitioning to an Automatic Exemption from Penalty starting in summer 2026. This guide covers eligible penalties, how to ask, interest, and appeals.
Deadline to know: If the IRS rejects a request to remove a penalty, the IRS says the taxpayer generally has 30 days from the date of the rejection letter to request an appeal. The letter states the specific deadline.
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Which IRS penalties can be abated
The IRS lists information return, failure to file, failure to pay, accuracy-related, failure to deposit, dishonored check and estimated tax penalties as eligible for relief, plus “other penalties as applicable.”
| Penalty | Statute | Main relief routes |
|---|---|---|
| Failure to file (5% of the tax due per month, up to 25%) | § 6651(a)(1) | First Time Abate or AEP, reasonable cause, statutory exceptions |
| Failure to pay (0.5% of unpaid tax per month, up to 25%) | § 6651(a)(2), (a)(3) | First Time Abate or AEP, reasonable cause, statutory exceptions |
| Failure to deposit | § 6656 | First Time Abate or AEP, reasonable cause |
| Estimated tax (individuals) | § 6654(e)(3) | Statutory waivers, not general reasonable cause |
The filing, payment and deposit statutes each apply “unless it is shown that such failure is due to reasonable cause and not due to willful neglect.” The estimated tax penalty differs: the IRS says reasonable cause “doesn’t apply.” Instead, § 6654(e)(3) allows a waiver for “casualty, disaster, or other unusual circumstances,” or for a taxpayer who retired after age 62 or became disabled and had reasonable cause. The IRS wants a written explanation signed under penalty of perjury.
The three types of IRS penalty relief
- First Time Abate and administrative waivers, based on compliance history or IRS announcements.
- Reasonable cause, when the taxpayer used ordinary business care but still could not comply.
- Statutory exceptions, written into the law, such as incorrect written IRS advice.
The Internal Revenue Manual (IRM 20.1.1.3) adds correction of IRS error and applies them in order: IRS error, statutory exceptions, administrative waivers, reasonable cause. A missing payment or unposted extension is fixed first, which can reverse a penalty on its own.
First Time Abate and the Automatic Exemption from Penalty
First Time Abate (FTA) is the IRS’s most common administrative waiver. Regardless of amount, it covers failure to file under § 6651(a)(1) (and § 6698(a)(1) for partnerships, § 6699(a)(1) for S corporations), failure to pay under § 6651(a)(2) and (a)(3), and failure to deposit under § 6656. The IRS requires a timely compliance history:
- The same type of return was filed on time for the prior three years (or 12 consecutive quarters).
- No penalty other than an estimated tax penalty in that period, unless abated for reasonable cause or IRS error.
- For businesses, fewer than four deposit penalty waivers in that period, and no penalty for avoiding EFTPS.
It does not apply to returns filed once or infrequently, the daily delinquency penalty, or information reporting tied to another filing. The IRM says FTA covers a single tax period, and its approval letter says it “is only available one time.”
What changes in summer 2026
The IRS says the Automatic Exemption from Penalty (AEP) “begins summer 2026.” A taxpayer who files or pays late after three timely years (or 12 consecutive quarters) “won’t be assessed a penalty.” It covers 2025 tax year returns and 2026 quarterly returns and later, on Forms 1040, 1065, 1120, 940, 941, 943, 944, 945 and CT-1.
| Feature | First Time Abate | Automatic Exemption |
|---|---|---|
| Periods | Earlier years, plus 2025 tax year and 2026 quarterly returns not considered for AEP | 2025 tax year and 2026 quarterly returns, and later |
| How granted | Taxpayer must contact the IRS | Automatic |
| Assessment | Assessed, then removed | Never assessed |
| Failure-to-pay penalty | May keep accruing until tax is paid | Does not accrue |
The taxpayer still owes “any unpaid tax, interest, or other penalty assessment not subject to AEP relief.” A request is needed for FTA on earlier years, for a 2025 or 2026 return AEP did not consider, and for a notice showing a penalty AEP should have prevented. An FTA request need not name FTA or include documents; the IRS checks the account. Under the IRM, unpaid tax keeps drawing the failure-to-pay penalty, and that added amount can be removed under FTA once the tax is paid in full.
Reasonable cause and ordinary business care
The IRM says reasonable cause relief “is generally granted when the taxpayer exercised ordinary business care and prudence in determining their tax obligations but was nevertheless unable to comply.”
For late filing or payment, the IRS gives examples: fires, natural disasters or civil disturbances; inability to get records; death, serious illness or unavoidable absence of the taxpayer or immediate family; and system issues that delayed electronic filing or payment. IRM 20.1.1 also covers mistakes, erroneous advice, ignorance of the law, forgetfulness and inaccessible notices.
What generally does not qualify: reliance on a tax professional (the IRM says the duty “cannot be delegated”) and lack of knowledge. Mistakes and lack of funds alone also fall short unless other facts show the taxpayer tried to comply.
The IRM asks what happened and when, how it prevented compliance, how the taxpayer handled other affairs, and what was done afterward. Reasonable cause “does not exist” without compliance within a reasonable time, and the burden of proof is generally on the taxpayer. The IRS suggests hospital or court records with start and end dates, disaster records, and copies of letters sent and answers received.
Statutory exceptions and incorrect IRS advice
Under 26 U.S.C. § 6404(f), the IRS “shall abate” a penalty caused by erroneous written advice from an IRS employee, if the advice answered a specific written request, was reasonably relied on, and the penalty did not come from the taxpayer’s failure to give “adequate or accurate information.” The Form 843 instructions require copies of the request, the advice and any adjustment report.
A return mailed on time is another exception: correctly addressed, with postage, mailed in the United States by the deadline. A timely e-filed return rejected by IRS systems still counts if resent within 10 days. Taxpayers in federal disaster areas or combat zones may also be eligible.
Not sure which kind of penalty relief fits?
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How to request IRS penalty abatement
- Read the notice. The IRS says to follow its instructions; the Form 843 instructions note a taxpayer answering a notice “may not have to file Form 843.”
- Call the number on the notice. Have the notice, the penalty and the reasons. The IRS says it will tell the caller whether relief is approved.
- Write if the call does not resolve it. On Form 843, line 6 takes the Code section from the notice, line 7 gives the reason (IRS error or delay, erroneous written advice, or reasonable cause), and line 8 is the explanation with evidence. Generally one form per tax period; both spouses sign for a joint return.
- Mail it correctly. A response goes to the return address on the notice.
- Name each penalty. The IRM says a request must identify each penalty, with dates that match the events.
A penalty already paid is recovered by refund claim, generally within 3 years of filing the return or 2 years of paying, whichever is later. Under § 6651(h), an individual who filed on time pays 0.25% a month instead of 0.5% while an installment agreement is in effect.
What happens to interest
The IRS says it will “automatically reduce or remove the related interest” when a penalty is reduced or removed. Interest on the tax itself is separate: the IRS does not “remove or reduce interest for reasonable cause or as first-time relief.”
Under § 6404(e), interest on tax may be abated only for an unreasonable IRS error or delay in a ministerial or managerial act, after the IRS contacted the taxpayer in writing, if no significant part of it is the taxpayer’s doing. The IRS says this excludes employment taxes and covers only interest from the period of the error or delay. Requests go on Form 843 or in a signed letter. Under § 6404(h), the Tax Court can review a refusal for abuse of discretion if the case is brought no later than 180 days after the IRS mails its final determination.
If the IRS denies the request
The IRM requires a written denial with appeal rights, even for a phone request. The appeal goes to the Independent Office of Appeals, generally within 30 days of the rejection letter. Publication 5 says that if nothing is done, the IRS closes the case without abating the penalty.
- The written protest goes to the address on the denial letter, not directly to Appeals; Publication 5 lists its contents.
- The IRM says Appeals “has the authority to settle penalties for less than the full amount based on hazards of litigation.”
- After Appeals, Publication 4576 says review is by suit in U.S. District Court or the Court of Federal Claims, and “most penalties must be paid in full before filing suit.”
Lien, levy and installment agreement disputes follow Publication 1660. The Taxpayer Advocate Service can also help.
When an attorney matters
A request can be as simple as a phone call or a Form 843 with records. The IRS will not discuss an account with a third party without written authorization such as Form 2848, and it lists attorneys, CPAs and enrolled agents alike as Appeals representatives.
The difference shows up when a dispute is headed to federal court, or when relief is one piece of a larger plan for back taxes, unfiled returns or collection. Taxpayers in those situations often ask a tax attorney to review the record, request relief or handle the appeal. Low Income Taxpayer Clinics may help those who cannot afford one.
Related guides
Frequently Asked Questions
What is first time penalty abatement?
First Time Abate is an IRS administrative waiver of the failure-to-file, failure-to-pay and failure-to-deposit penalties for taxpayers with three years of timely compliance history. It covers a single tax period and is transitioning to the Automatic Exemption from Penalty starting in summer 2026.
Do I have to request the Automatic Exemption from Penalty?
No. The IRS applies AEP automatically when an eligible original return for the 2025 tax year or later finishes processing. A taxpayer whose notice shows a penalty AEP should have prevented can contact the IRS.
Does penalty abatement remove interest too?
Partly. The IRS automatically reduces or removes interest charged on a removed penalty. Interest on the tax itself is not removed for reasonable cause or first-time relief; under 26 U.S.C. § 6404(e) it can be abated only for an unreasonable IRS error or delay.
Is not having the money to pay reasonable cause?
Not by itself. The IRS says lack of funds alone is not reasonable cause, although other facts showing reasonable care may support relief.
What happens if the IRS denies a penalty abatement request?
The IRS must send a written denial explaining appeal rights. A taxpayer generally has 30 days from the rejection letter to request an appeal by written protest mailed to the address on that letter.
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Ray Neu
Ray Neu is the publisher of IRSAttorneys.net. A former law enforcement officer with a background in criminal justice and digital publishing, he oversees editorial direction, partnership standards, and compliance review for the site. He is not an attorney and does not provide legal advice; all tax law content is sourced and reviewed against the standards documented on the Editorial Team & Standards page.
Sources
- Penalty relief
- Administrative penalty relief (First Time Abate and AEP)
- Penalty relief for reasonable cause
- Penalty relief due to statutory exception
- Penalties
- Failure to file penalty
- Failure to pay penalty
- Estimated tax penalty for individuals
- Interest
- Interest abatement
- Form 843
- Instructions for Form 843
- IRM 20.1.1, Penalty Relief
- Penalty appeal
- Preparing a request for Appeals
- Publication 5
- Publication 4576
- 26 U.S.C. § 6404
- 26 U.S.C. § 6651
- 26 U.S.C. § 6654
- 26 U.S.C. § 6656
IRS Circular 230 Disclosure: To ensure compliance with Treasury Department rules governing tax practice, any tax information contained on this website was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty. You should consult a licensed tax professional regarding your individual situation.
Results described on this website are not a guarantee, warranty, or prediction of the outcome of any tax matter. Every situation is different. Prior results do not guarantee a similar outcome. Article content reflects general information about federal tax procedure as of the last reviewed date and may not reflect subsequent changes in IRS policy, regulations, or case law.