First time penalty abatement (FTA ) is an administrative policy of the IRS to provide relief from penalties to taxpayers for failure to file taxes or pay tax in time or failure to deposit tax in time. The penalty relief under the FTA waiver only applies to a single tax period and is not applicable based solely on a taxpayer’s first request for penalty relief.
In other words, if you are liable for any of the following penalties for the first time, you may apply for the first-time penalty abatement from IRS.
- Failure to file (FTF) penalty under IRC 6651(a)(1), IRC 6698(a)(1), or IRC 6699(a)(1),
- Failure to pay (FTP) penalty under IRC 6651(a)(2) and/or IRC 6651(a)(3), and
- Failure to deposit (FTD) penalty under IRC 6656.
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Video on penalty abatement
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What forms or returns qualify for first-time penalty abatement?
If there is a failure to file, failure to pay penalties, failure to deposit estimated tax, and failure to deposit (employment tax returns) about any of the following tax returns/ forms, FTA shall apply.
- Income tax returns
- Form 1040 series, U.S. Individual Income Tax Return
- Form 1041, U.S. Income Tax Return for Estates and Trusts
- Form 1065, U.S. Return of Partnership Income
- Form 1120, U.S. Corporation Income Tax Return
- Form 1120S, S. Income Tax Return for an S Corporation
- Employment tax returns
- Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
- Form 941, Employer’s Quarterly Federal Tax Return
- Form 943, Employer’s Annual Tax Return for Agricultural Employees
- Form 944, Employer’s Annual Federal Tax Return
- Form 945, Annual Return of Withheld Federal Income Tax
- Excise tax returns
- Form 720, Quarterly Federal Excise Tax Return
- Form 2290, Heavy Highway Vehicle Use Tax Return
Type of Returns Not Eligible for First-Time Abatement Does
The penalty relief under the FTA waiver does not apply to the following:
- Returns with an event-based filing requirement generally return filed once or infrequently, such as Form 706, U.S. Estate Tax Return, and Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
- The daily delinquency penalty (DDP), see e.g., IRC 6652(c)(2)(A) and IRM 20.1.8, Employee Plans and Exempt Organization Penalties.
- Information reporting is dependent on another filing, such as the attached forms.
Two Most Important Criteria for Penalty Abatement
You didn’t previously have to file a return or have no penalties for the three tax years before the tax year in which you received a penalty and want to get administrative relief under FTA. You can get the first-time penalty abatement if IRS satisfies itself that the following two conditions are met:
- You have filed or filed a valid extension for all required returns due.
- The taxpayer has paid or arranged to pay any tax currently due.
In this regard, ground for penalty relief for having a reasonable cause is not required for the FTA waiver. If there is reasonable cause for failure to file or pay tax or deposit tax, you should request for the waiver on the ground of reasonable cause and not FTA, which can use at a different time.
How to Request for First-Time Penalty Abatement?
There are several ways that a taxpayer can apply for or request FTA. The first is to ask your tax attorney or representative to use the IRS Practitioner Priority Service (PPS) or the IRS e-services Electronic Account Resolution function. Further, you can also use the IRS penalty abatement form 843 to request waiver of penalty under the First Time Penalty Abatement policy in writing. You can get the instruction for filing Form 843 here.
What happens when the IRS is convinced of your FTA request?
If IRS is convinced and finds you fit for first-time penalty abatement, you may receive a written letter from them like the one below :
We approved your request to remove the penalties. However, we only granted penalty relief because you have a good history of filing and paying on time. This type of penalty removal is only available one time. We will base our decisions to remove any future penalties on reasonable cause criteria.[source IRMPart 20 ]
Read also how to deal with final notice of intent.
How to request first time penalty abatement?
There are two ways to request first time penalty abatement. First is to attach Form 843, Claim for Refund and Request for Abatement. with the tax return. The second method is to send the first time penalty abatement letter to IRS .
The only point that one should give attention to while sending a request for first time abatement of penalty is that IRS will check if you satisfy all the three conditions described in 126.96.36.199.3.2.1 First Time Abate (FTA) .Apart from that , you can also create grounds of “reasonable cause “ if you can sufficiently prove your circumstances.If you are found eligible under both the Reasonable Cause relief and also qualify under ” First Time Abate ” IRS will apply First Time Abate.
First time penalty abatement letter sample
11/20/2022 Internal Revenue Service Address ............... Re: [ taxpayer name and identification number] Enter tax form and tax period Request for first-time penalty abatement – [select one -failure-to-file/failure-to-pay/failure-to-deposit] and amount To Whom It May Concern: We respectfully request that the [failure-to-file/failure-to-pay/failure-to-deposit] penalty be abated based on the IRS’s administrative waiver procedures, as discussed in IRM 188.8.131.52.3.2.1, First Time Abate (FTA). Taxpayer meets first-time penalty abatement criteria. The taxpayer meets all of the first-time penalty abatement criteria as stated in IRM 184.108.40.206.3.2.1 which is given below: • I have filed all required returns and have no outstanding request for a return from the IRS. • I have paid, or made arrangement to pay as per IRS direction on all taxes due . • There is no prior penalties for the preceding three years. [Optional We also request penalty abatement due to reasonable cause on the basis of facts and circumstances described below.] Thank you for your consideration. Sincerely, [Firm Name] Phone :
IRS first time penalty abatement phone number
IRS can approve or reject your first time penalty abatement requests over phone call itself. The number on which IRS accepts penalty relief is written at the top right corner of your notice or letter informing you about penalty. IRS suggest when you call on those toll-free-numbers , keep following details with you at the time of call ,
- The notice or letter we sent you
- The penalty you want relieved
- The reasons you think we should remove it
What if the phone call did not materialise in removal of the penalty . Don.worry ! You can request for FTA through letter as stated above.
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