Penalties & Relief

First-Time Penalty Abatement: A Complete Guide (2026)

By Angeline Balsitis, EA · Reviewed by Melissa Ly, Chief Tax Officer · Updated February 11, 2026 · Editorial Standards

What first-time penalty abatement actually is

First-time penalty abatement — the IRS calls it the "First Time Abate" administrative waiver — is the easiest penalty relief the IRS offers. It's a clean-record reward: if you've generally done the right thing for years and slipped just once, the IRS will remove the penalty without making you prove a hardship or write a long explanation.

It is not a settlement and it is not "pennies on the dollar." It only touches penalties, not the tax itself. But penalties can be a big slice of what you owe, so removing them is real money. The IRS describes the program on its First Time Abate page.

Who qualifies for first-time penalty abatement

You generally qualify if all three of these are true:

• Clean penalty history. You had no penalties (other than an estimated-tax penalty) for the three tax years before the year you're asking about.
• All returns filed. You've filed every return you were required to file, or you filed a valid extension.
• Current on payment. You've paid the tax you owe, or you've set up a payment arrangement — like an streamlined installment agreement — to pay it over time.

That last point surprises people: you do not have to pay the balance in full before the IRS will waive the penalty. You just have to be in good standing on filing and have a plan for the tax.

What penalties it removes — and what it doesn't

First-time abatement applies to three common penalties:

• Failure-to-file — for filing a return late.
• Failure-to-pay — for paying the tax late.
• Failure-to-deposit — for businesses that deposit payroll taxes late.

If you're unsure which penalty you're being charged, our guide on failure-to-file vs. failure-to-pay penalties breaks down the difference and the math.

What it does not remove: interest, the accuracy-related penalty, or the fraud penalty. Interest is set by law and keeps running on any unpaid tax. The good news — when the IRS removes a penalty, it also removes the interest that was charged on that penalty.

A worked example

Say you filed your 2024 return six months late and owed $10,000 in tax. Here's roughly what the penalties look like before relief:

• Failure-to-file penalty: 5% per month, capped at 25% — about $2,500.
• Failure-to-pay penalty: 0.5% per month for six months — about $300.

(When both penalties apply in the same month, the IRS reduces the failure-to-file penalty by the failure-to-pay amount, so the totals are a little lower than they look.) With first-time abatement granted, that roughly $2,800 in penalties — plus the interest charged on those penalties — comes off your balance. You'd still owe the $10,000 tax and the interest on the tax, but the penalty stack disappears. For a deeper look at how penalties pile up, see how big IRS penalties get.

How to request first-time penalty abatement, step by step

1. Confirm the penalty and tax year. Pull up the notice or log into your IRS online account so you know the exact penalty type and amount you're asking to remove.
2. Check your three-year history. Make sure you had no penalties in the three prior years. If you did, you may need reasonable-cause relief instead (see below).
3. Get current. File any missing returns and either pay the tax or set up a payment plan. The IRS won't grant abatement while returns are outstanding.
4. Call the IRS. Use the phone number on your notice and ask for "first-time abatement" by name. Many representatives can check your history and approve it during the call.
5. Or request it in writing. If you've already paid the penalty and want it refunded, file Form 843, Claim for Refund and Request for Abatement. Keep copies of everything.
6. Save first-time abatement for the right year. You can only use it for one tax period at a time. If you have penalties across several years, it's often smartest to apply it to the year with the biggest penalty — and use reasonable cause for the others.

If you don't qualify: reasonable cause

No clean three-year record? You can still ask for relief based on reasonable cause. This is for events beyond your control that kept you from filing or paying on time — a serious illness, a death in the family, a natural disaster, fire, or records you couldn't access. The IRS explains the standards on its penalty relief page.

Reasonable cause takes more work than first-time abatement. You'll need to explain what happened, give specific dates, and attach supporting records — hospital bills, an insurance claim, a death certificate. A clear, documented story is what wins these requests. And remember: anyone promising to "settle for pennies on the dollar" before they've reviewed your finances is selling you something, not analyzing your case.

How this fits your bigger picture

Penalty abatement works best as one move in a sequence. Usually the order is: file every required return, set up a way to handle the tax, then ask for penalty relief, then deal with the remaining balance. If you got a bill like a CP14 notice and can't pay it all at once, fixing the penalties and the payment plan together often saves the most. Doing it in the wrong order can mean you waste your one-time abatement on a small year — so it's worth a quick review first.

First-time penalty abatement, answered

This guide is general information, not tax or legal advice for your specific situation. Eligibility for IRS programs depends on individual facts and circumstances; no outcome is guaranteed.

Related: failure-to-file vs. failure-to-pay penalties, how big IRS penalties get, or browse all guides.