Learn how IRS First-Time Abate works, which penalties qualify, how the 2026 Automatic Exemption transition changes relief, and what remains due.
First-Time Penalty Abatement, commonly called First-Time Abate or FTA, is IRS administrative relief historically available to qualifying taxpayers with a timely compliance history. It can remove certain failure-to-file, failure-to-pay, and failure-to-deposit penalties without requiring the taxpayer to prove reasonable cause.
FTA is now in transition. Beginning in summer 2026, the IRS is introducing Automatic Exemption from Penalty, or AEP. AEP automatically prevents eligible penalties from being assessed when IRS records show the required compliance history. The IRS says AEP will replace FTA for eligible returns with original due dates on or after January 1, 2027.
AEP begins with eligible 2025 annual returns and 2026 quarterly returns. It applies to specified return series, including Forms 1040, 1065, and 1120; employment returns Forms 940, 941, 943, 944, and 945; and Form CT-1. Eligible penalties include failure to file, failure to pay, and failure to deposit.
During transition, some qualifying taxpayers may still receive a penalty notice for an eligible 2025 return or 2026 quarterly period. The IRS says those taxpayers may contact it to request FTA. Older years and periods remain within the FTA framework where otherwise eligible. Because processing systems and relief dates matter, review the actual notice and current IRS guidance rather than assuming the page label controls.
IRS guidance generally requires the same return type to have been timely filed for the prior three years—or the prior 12 consecutive quarters for quarterly filers. The history must show no disqualifying penalty, although a penalty later removed for reasonable cause or IRS error generally does not spoil the history. Estimated-tax penalties are treated differently for this test.
Business taxpayers have additional limits. IRS guidance states that a failure-to-deposit penalty cannot have been waived four or more times during the relevant prior period, and relief is unavailable for an EFTPS-avoidance failure. Event-based or infrequently filed returns, the Daily Delinquency Penalty, and information reporting dependent on another filing are not eligible for this administrative relief.
FTA generally requires the taxpayer to contact the IRS after a penalty is assessed. Supporting documents are not ordinarily needed because the IRS reviews account history. AEP is applied automatically as an eligible original return processes, no penalty assessment is made, and the IRS sends a letter explaining the exemption.
Both forms of relief leave unpaid tax and unrelated penalties in place. Under FTA, a failure-to-pay penalty may continue accruing until the tax is fully paid before the later abatement. Under AEP, the eligible failure-to-pay penalty is not assessed, but interest on unpaid tax still applies.
Assume Jordan filed 2021, 2022, and 2023 Forms 1040 on time and paid the tax due, but filed the 2024 return late. The IRS assesses a $900 failure-to-file penalty. No disqualifying penalty appears in the three-year lookback. Jordan contacts the number on the notice, and the IRS grants FTA. The $900 penalty and related interest are removed; the underlying tax and interest on that tax remain.
Now assume Jordan files an eligible 2025 return late during the AEP rollout. If IRS records establish the required timely history, the IRS may prevent the qualifying penalty from being assessed and issue an AEP notice. If a penalty is assessed despite apparent eligibility, Jordan should contact the IRS.
Call the number on the penalty notice or send a written statement or Form 843 as current instructions permit. Identify the taxpayer, form, period, penalty, and notice. Ask the IRS to review administrative penalty relief eligibility. Obtain an Account Transcript first if filing dates, payments, or earlier penalties are uncertain.
If FTA or AEP does not apply, reasonable cause may still be available. Do not dilute a strong reasonable-cause record by assuming administrative relief is the only option. Appeal rights and deadlines on a denial should be reviewed promptly.
California's similarly named One-Time Penalty Abatement is not the federal FTA program. FTB relief is once in a lifetime, is limited to individuals under the Personal Income Tax Law, covers specified timeliness penalties, and applies to requests for taxable years beginning on or after January 1, 2022. Trusts, estates, and business entities do not qualify.
FTB requires filing compliance and payment of, or a current arrangement for, other amounts due. Individuals can use Form FTB 2918 or the current FTB contact process. Federal AEP does not automatically change a California assessment.
Heath Income Tax helps taxpayers review compliance history, identify the correct federal or California relief program, and respond to penalty notices during the AEP transition.
Is FTA automatic?
Historically no; taxpayers request it. AEP is the new automatic process for eligible returns and periods.
Must a taxpayer explain why the return was late?
FTA primarily depends on account history, not a reasonable-cause narrative. The IRS still verifies eligibility.
Can FTA remove an estimated-tax penalty?
No. Estimated-tax penalty relief follows separate statutory rules.
Is California relief the same?
No. FTB's One-Time Penalty Abatement has different eligibility and is limited to qualifying individuals.
The definitions and examples on this page are for informational purposes only and do not constitute tax advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making decisions based on this content.
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