IRS First Time Penalty Abatement Letter: How to Qualify and Submit

Many taxpayers may not realize the IRS offers a way to reduce or eliminate certain penalties through First Time Penalty Abatement (FTA). This relief can be particularly helpful for those who typically comply with tax laws but made an isolated mistake, like missing a filing or payment deadline.

Understanding how to properly request this abatement in writing is beneficial. A well-prepared letter can significantly improve the chances of having a penalty waived.

Qualifying Factors

Eligibility for First Time Penalty Abatement hinges primarily on a taxpayer’s compliance history. The IRS examines the three tax years immediately preceding the year the penalty was incurred. A “clean” record during this period is generally required, meaning all necessary returns were filed (or valid extensions obtained) and no penalties were assessed. If penalties were assessed in those prior three years but later removed for reasons other than FTA, such as demonstrating reasonable cause, eligibility might still be possible.

In addition to the three-year clean history, taxpayers must be current with their filing obligations, having submitted all legally required returns now due. Filing an extension for the current year typically meets this requirement. Furthermore, any tax currently owed must be paid or arrangements made for payment, such as establishing an installment agreement with the IRS. While full payment isn’t mandatory before requesting FTA, the failure-to-pay penalty can continue to accumulate until the tax debt is fully settled, even if FTA is granted for the initial penalty amount.

FTA relief applies specifically to three common penalties: failure-to-file, failure-to-pay (both under Internal Revenue Code Section 6651), and failure-to-deposit employment taxes (under Internal Revenue Code Section 6656).¹Internal Revenue Service. Administrative Penalty Relief These penalties can arise from various tax forms, including:

• Individual income tax returns (Form 1040 series)
• Corporate returns (Form 1120)
• S corporation returns (Form 1120S)
• Partnership returns (Form 1065)
• Certain trust and estate returns (Form 1041)
• Various employment tax returns (like Forms 940, 941, 943, 944, 945)

However, FTA is not available for all penalties or forms. It generally does not apply to estate tax returns (Form 706), gift tax returns (Form 709), or estimated tax penalties. For the failure-to-deposit penalty, FTA is unavailable if the penalty resulted from avoiding the Electronic Federal Tax Payment System (EFTPS) or if multiple failure-to-deposit penalties were waived in the preceding three years.

Essential Components of the Letter

When drafting a written request for First Time Penalty Abatement, clarity and completeness are important. Start by clearly identifying yourself with your full name, address, and taxpayer identification number (Social Security Number for individuals, Employer Identification Number for businesses). This allows the IRS to locate your account accurately.

Next, specify the context. Mention the tax year or period the penalty applies to and the specific tax form involved (e.g., Form 1040, Form 941). If you received an IRS notice about the penalty, including the notice number and date helps the IRS identify the exact penalty being addressed.

The core of the letter is the explicit request for relief. Clearly state that you are requesting “First Time Penalty Abatement” for the specific penalty or penalties. Using this terminology helps the IRS categorize your request correctly. While not required, a brief statement affirming your belief that you meet the FTA requirements based on your compliance history can support your request.

Conclude with your current contact information, including a daytime phone number. The letter must be signed and dated by the taxpayer. If a tax professional submits the letter on your behalf, they must include a valid Power of Attorney (Form 2848) or have one on file with the IRS.

Support Documents

Requesting First Time Penalty Abatement typically requires minimal supporting documentation because the IRS primarily uses its internal records to verify eligibility. The agency’s systems contain your filing and payment history, allowing them to check the three-year clean compliance record without needing copies of past returns or payment confirmations from you.

This contrasts with requests for penalty abatement based on “reasonable cause,” which require substantial evidence explaining the reason for the failure (e.g., medical records, proof of natural disaster). For FTA, the focus is solely on the compliance history, not the reason for the specific error, making documents explaining the mistake generally unnecessary.

While the IRS verifies most criteria internally, ensure that if a tax professional is submitting the request for you, a completed Form 2848, Power of Attorney and Declaration of Representative, is included or already on file. This form grants the representative authority to communicate with the IRS and act on your behalf regarding the specified tax matters. Without it, the IRS cannot process requests from the representative.

Steps to Submit

After determining potential eligibility and preparing your request, the next step is submission to the IRS. One common method, especially after receiving an IRS notice, is calling the agency directly using the toll-free number usually found on the notice. Be prepared to provide identifying information and details about the penalty. An IRS representative will review your account history for FTA eligibility and may grant the abatement during the call.

Alternatively, you can submit a written request. This can be the letter you prepared or Form 843, Claim for Refund and Request for Abatement.²Internal Revenue Service. Penalty Relief If responding to an IRS notice, send your written request to the address provided on that notice.

If you haven’t received a notice, the correct mailing address typically depends on the type of tax return involved. Instructions for Form 843 provide detailed address information, or you can find the appropriate service center address on the IRS website (IRS.gov). Consider using certified mail with return receipt requested for proof of delivery.

It’s generally best to request FTA after receiving the penalty notice. Remember, even if FTA is granted, the failure-to-pay penalty continues to accrue until the underlying tax is paid in full. You might need to request abatement again for penalties accrued after the initial request once the tax is fully paid. Having paid the tax or established a payment plan strengthens your request.

Currently, there isn’t a universal online portal for submitting FTA requests, so phone or mail remain the standard methods. If your request is denied, the IRS will typically notify you in writing, and you may have appeal options available.

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