Penalty Abatement Strategies: First-Time Abatement, Reasonable Cause, and Administrative Waiver in 2025

You filed 4 months late after your accountant retired unexpectedly and you scrambled to find a replacement. The underlying tax of $34,000 is paid in full. You're devastated—the penalty adds about 22% to your tax bill for circumstances largely beyond your control. You assume penalties are non-negotiable and write a check for the full amount. Wrong.

You qualify for IRS first time penalty abatement. You've never had penalties in the prior three years, you've filed all required returns, and you've paid all taxes owed. A simple phone call to the IRS requesting first time penalty abatement could eliminate the entire $8,500 penalty. Instead, you paid $8,500 unnecessarily because you didn't know this relief program existed.

If you know about penalty abatement strategies it can help you eliminate failure-to-file and failure-to-pay penalties through abatement if you have a clean compliance history, when reasonable cause penalty abatement is available for penalties. You can also be aware about which administrative waivers and relief programs apply to specific penalty types, and how to properly request abatement with the right documentation and arguments.

This article will help you understand what IRS first time penalty abatement is and how to qualify for this automatic relief, when reasonable cause penalty abatement is available and what evidence you need, which administrative waivers exist for specific penalty types, how to prepare effective abatement requests that maximize approval chances, and common mistakes that cause taxpayers to pay penalties unnecessarily.

What is first-time penalty abatement and how is it obtained?

First time penalty abatement is an administrative waiver the IRS grants to taxpayers with clean compliance histories who have their first penalty.

What is first-time penalty abatement?

IRS first time penalty abatement (FTA) is an administrative waiver program allowing taxpayers who have maintained a clean compliance record to request one-time penalty relief without proving reasonable cause. The IRS will abate eligible penalties if you meet the criteria—no detailed explanation or documentation required.

First time penalty abatement is the easiest penalty relief to obtain because it's nearly automatic if you qualify. Unlike reasonable cause (which requires proving specific circumstances), FTA simply requires demonstrating a pattern of compliance.

FTA eligibility requirements

To qualify for IRS first time penalty abatement, you must meet all three requirements:

Requirement 1: Clean penalty history - You didn't have any penalties (or had only estimated tax penalties) for the three tax years prior to the tax year with the penalty you're requesting to be abated.

Requirement 2: Filed all required returns - You've filed all currently required tax returns, or filed valid extensions of time to file.

Requirement 3: Paid or arranged to pay - You've paid all tax owed, or arranged an installment agreement to pay the tax.

Which penalties FTA covers

First time penalty abatement applies to:

• Failure-to-file penalties - 5% per month up to 25% of unpaid tax when returns are filed late.
• Failure-to-pay penalties - 0.5% per month up to 25% of unpaid tax when taxes aren't paid by the due date.
• Failure-to-deposit penalties - Penalties for late payroll tax deposits (employment taxes).

Which penalties FTA does NOT cover

IRS first time penalty abatement does NOT apply to:

• Accuracy-related penalties - 20% penalties for negligence or substantial understatement.
• Fraud penalties - 75% penalties for fraudulent tax evasion.
• Information return penalties - Penalties for late Forms 1099, W-2, 1095, etc.
• Estimated tax penalties - Penalties for insufficient quarterly estimated payments.
• International information return penalties - Penalties for late Forms 5471, 8865, 8858, 3520, FBAR, etc.

For these penalties, you must use reasonable cause penalty abatement or other relief mechanisms.

FTA applies per taxpayer, not per penalty

If you have multiple penalties for the same tax year (both failure-to-file and failure-to-pay penalties), first time penalty abatement abates all eligible penalties for that year in one request.

Example: Your 2024 return has $5,000 failure-to-file penalty and $800 failure-to-pay penalty. One FTA request abates both penalties—total $5,800 relief.

FTA is truly "first-time"—use it strategically

Once you use IRS first time penalty abatement, you must maintain three additional years of penalty-free compliance before you're eligible again. If you receive penalties in 2024 and 2025, you can only use FTA for one year—choose the year with the larger penalty.

Strategic tip: If you have penalties for multiple years and qualify for reasonable cause for one year, use reasonable cause for that year and save first time penalty abatement for the year where reasonable cause doesn't apply.

How to request first-time penalty abatement

Method 1: Call the IRS - Call the phone number shown on your penalty notice. Request IRS first time penalty abatement. If you meet the eligibility criteria, IRS staff can approve FTA over the phone. This is the fastest method.

Method 2: Written request - Write a letter to the IRS address shown on the penalty notice. Include:

• Your name, address, Social Security number or EIN
• Tax year(s) for which you're requesting penalty abatement
• Type of penalty (failure-to-file, failure-to-pay)
• Statement that you're requesting first time penalty abatement
• Confirmation that you meet all three eligibility requirements
• Your signature

IRS will review and typically approve within 60-90 days if you qualify.

Method 3: Form 843 - You can also file Form 843 (Claim for Refund and Request for Abatement) to request IRS first time penalty abatement if you've already paid the penalties and want a refund. Form 843 must be filed within 2 years from the date you paid the tax or 3 years from the date the return was filed, whichever is later.

FTA approval rates

The IRS grants first time penalty abatement to most taxpayers who qualify. It's not discretionary—if you meet the three requirements, the IRS will grant it. Approval rates exceed 80% for taxpayers who properly request FTA and meet the criteria.

Reasonable cause abatement: When circumstances prevented compliance

Reasonable cause penalty abatement is available when you can show the failure to comply was due to circumstances beyond your control and you acted in good faith.

What is a reasonable cause?

Reasonable cause penalty abatement means you exercised ordinary business care and prudence but were nevertheless unable to comply with tax obligations due to circumstances beyond your control. You must show both:

• Reasonable cause - Circumstances that prevented compliance despite reasonable efforts.
• Good faith - You made reasonable attempts to comply with obligations and didn't deliberately disregard requirements.

Common reasonable cause situations

The IRS recognizes several common reasonable cause penalty abatement scenarios:

Death, serious illness, or unavoidable absence - You or an immediate family member experienced death, serious illness, or unavoidable absence that prevented you from meeting tax obligations.

Example: You were hospitalized for two months following a car accident and physically unable to file your tax return. This qualifies as reasonable cause penalty abatement.

Fire, casualty, natural disaster, or civil disturbance - Your business records were destroyed in a fire, flood, earthquake, or other disaster, preventing you from filing accurately or on time.

Example: Hurricane damage destroyed your business location and all financial records in September. Your October tax deadline was missed while recovering. This qualifies as reasonable cause penalty abatement.

Unable to obtain records - Despite reasonable efforts, you couldn't obtain necessary records or information from third parties.

Example: You requested W-2s and 1099s from former employers/clients in January but they didn't provide them until March, causing your February filing deadline to be missed. This qualifies if you can document your timely requests.

Reliance on incorrect professional advice - You relied on incorrect written advice from a qualified tax professional (CPA, attorney, enrolled agent) who had all relevant facts.

Example: Your CPA advised you didn't need to file Form 5471 for your foreign corporation. The IRS later determined you did need to file and assessed penalties. If you provided complete accurate information to your CPA, this qualifies as reasonable cause penalty abatement.

IRS error or delay - The IRS provided incorrect written advice, failed to provide requested forms or instructions, or caused delays that prevented timely compliance.

Death or serious illness of tax preparer - Your regular tax preparer died or became seriously ill shortly before your deadline, and you couldn't find a replacement in time.

System or technology failures - The IRS e-file system failed on the deadline day, preventing timely electronic filing (must be documented).

What does NOT qualify as reasonable cause

• Ignorance of the law - "I didn't know I had to file" or "I didn't know this form existed" generally doesn't qualify unless the law is exceptionally complex and unclear.
• Lack of funds - Inability to pay taxes doesn't constitute reasonable cause penalty abatement for failure-to-pay penalties. "I can't afford to pay" isn't considered beyond your control.
• Reliance on non-professional advice - Following advice from friends, family members, or online forums doesn't qualify.
• Misunderstanding simple rules - Misinterpreting straightforward tax requirements doesn't qualify.
• Tax software errors - Errors in tax preparation software generally don't qualify unless you can prove the software was defective and you used it reasonably.
• Busy schedule or forgetting - Being busy with work or personal matters, forgetting deadlines, or losing track of time doesn't qualify.

Evidence required for reasonable cause

To successfully obtain reasonable cause penalty abatement, provide documentation supporting your circumstances:

• Medical situations: Hospital records, doctor's letters, medical bills showing dates of treatment/hospitalization.
• Natural disasters: FEMA declarations, insurance claims, photos of damage, police/fire department reports.
• Death of family member or preparer: Death certificate, obituary, statement from executor.
• Reliance on professional: Written advice from the professional, correspondence showing you provided complete information, professional's credentials.
• Unable to obtain records: Copies of your written requests to third parties with dates, proof they didn't respond timely, follow-up correspondence.
• IRS error: Copies of incorrect IRS written advice, documented attempts to obtain forms/information from IRS.

How to request reasonable cause abatement

Submit a written statement to the IRS explaining your reasonable cause. Include:

1. Header information: Your name, address, SSN/EIN, tax year, and type of penalty.
2. Statement of facts: Detailed chronology of what happened, when it happened, and how it prevented compliance.
3. Explanation of reasonable cause: Explain why the circumstances were beyond your control and how they prevented compliance despite your good faith efforts.
4. Steps taken to comply: Describe what steps you took to comply once the circumstances changed or were resolved.
5. Supporting documentation: Attach all supporting evidence (medical records, correspondence, death certificates, etc.).
6. Request for abatement: Clearly state you're requesting penalty abatement based on reasonable cause.
7. Signature: Sign and date the statement.

Mail the statement to the address shown on the penalty notice, or submit it in response to an IRS examination or collection notice.

Alternatively, you can file Form 843 to request reasonable cause penalty abatement. Form 843 is specifically designed for penalty abatement and refund requests. On Form 843, you must select the reason for your abatement request and attach a detailed statement explaining your reasonable cause with supporting documentation.

Reasonable cause for accuracy-related penalties

Reasonable cause penalty abatement is the only way to abate accuracy-related penalties (first time penalty abatement doesn't apply to them). To show reasonable cause for accuracy-related penalties, you must prove:

• Reasonable basis for position: You had a reasonable interpretation of tax law supporting your position.
• Good faith effort: You made a genuine effort to comply accurately.
• Reliance on professional advice: You relied on advice from a qualified professional who had all relevant facts.
• Complexity of law: The tax law in your situation was exceptionally complex or ambiguous.

Example: Your business claimed bonus depreciation on certain assets. The IRS audited and determined the assets didn't qualify, resulting in a $15,000 tax adjustment and $3,000 accuracy-related penalty. Your CPA advised the assets qualified and provided a written memo explaining the analysis. You provided all relevant facts to the CPA. You request reasonable cause penalty abatement based on reliance on professional advice, attaching the CPA's memo and correspondence showing you provided complete information. This has a strong chance of abatement.

Administrative waivers and relief programs

Beyond FTA and reasonable cause, the IRS offers administrative waivers and special relief programs for specific penalty types or circumstances.

Statutory exception for international information return penalties

In 2024, the IRS revised its internal procedures to significantly reduce the automatic assessment of penalties for certain late-filed international information returns, including Forms 3520, 3520-A, 5471, 8865, and 8858. Instead of auto-generating $10,000 penalties in many cases, the IRS now requires examiners to review each late filing and consider reasonable cause and the taxpayer’s compliance history before deciding whether to impose penalties.

This change does not eliminate international information return penalties, but it shifts them from automatic to discretionary in many situations, improving the chances of relief for first-time filers, complex fact patterns, or taxpayers with strong reasonable cause explanations.

How to benefit: If you file these international forms late, include a detailed statement explaining why the filing was late, what steps you took to comply, and why penalties should not be imposed (reasonable cause, first-time filing, complexity, etc.). Under the revised procedures, this explanation is reviewed before penalties are assessed, increasing the likelihood that no penalty will be imposed in appropriate cases.

Disaster relief

When the President declares a major disaster area, the IRS automatically postpones tax deadlines for affected taxpayers. If you're in a federally declared disaster area, failure-to-file and failure-to-pay penalties are automatically waived for periods covered by the disaster relief.

Additionally, if you were affected by a disaster (even if not in a declared disaster area), you can request reasonable cause penalty abatement based on the disaster.

Combat zone relief

Members of the U.S. Armed Forces serving in combat zones receive automatic extensions of time to file and pay taxes, with no penalties or interest accruing during the extension period. This continues for 180 days after leaving the combat zone.

Innocent spouse relief

If your spouse (or former spouse) incorrectly reported items or omitted income on a jointly filed return, you may qualify for innocent spouse relief, which can eliminate your liability for tax, penalties, and interest attributable to your spouse's errors.

This isn't exactly penalty abatement—it's relief from the underlying liability—but it effectively eliminates penalties for the innocent spouse. You can request innocent spouse relief using Form 8857 (Request for Innocent Spouse Relief).

Erroneous written IRS advice

If you relied on incorrect written advice from the IRS, the IRS will abate penalties resulting from following that advice. You must show:

• You requested written advice from the IRS on a specific issue
• The IRS provided written advice (not oral advice)
• You relied on the advice
• Penalties resulted from following the advice

This is rare because the IRS rarely provides specific written advice, but when it does and the advice is wrong, penalties will be abated.

Procedural or administrative relief

In some cases, the IRS grants administrative relief when penalties resulted from IRS processing delays, errors, or procedural issues.

Example: You timely mailed your return and payment, but the IRS didn't process it for several months due to backlog. The delay caused failure-to-file or failure-to-pay penalties. You can request abatement based on IRS administrative delays, providing proof of timely mailing (certified mail receipt).

Penalty relief for installment agreement defaults

If you default on an installment agreement (miss payments), the IRS may reinstate the agreement and waive penalties if you can show the default was due to circumstances beyond your control and you resume payments promptly.

How to maximize penalty abatement success

Strategy 1: Request FTA first when eligible

If you qualify for IRS first time penalty abatement, always request it first. FTA is the easiest relief to obtain and doesn't require proving reasonable cause. Save reasonable cause arguments for penalties that don't qualify for FTA or for future years after you've used FTA.

Strategy 2: Provide detailed documentation

Generic statements like "I was sick" or "I had family problems" rarely succeed. Provide specific dates, detailed descriptions, and supporting documentation (medical records, death certificates, correspondence, etc.).

Strategy 3: Show good faith efforts

Demonstrate you made reasonable efforts to comply despite circumstances. If you were ill, show you filed as soon as you recovered. If records were destroyed, show you attempted to reconstruct them and filed as soon as possible.

Strategy 4: Be respectful and professional

IRS agents have discretion in reasonable cause determinations. Professional, respectful communication improves your chances. Avoid blaming the IRS, being defensive, or making excuses.

Strategy 5: Request penalty relief promptly

Request abatement as soon as you receive a penalty notice. Waiting months or years suggests you weren't diligent. Prompt requests indicate good faith.

Strategy 6: Appeal denials

If your initial reasonable cause request is denied, you can appeal to the IRS Office of Appeals. Appeals officers have broader authority and may grant relief where initial reviewers didn't. Don't give up after one denial.

Strategy 7: Consider professional representation

For large penalties (over $10,000), complex situations, or accuracy-related penalties, consider hiring a tax professional (CPA, attorney, enrolled agent) to prepare your abatement request. Professionals know which arguments work and how to present them effectively.

Strategy 8: File missing returns before requesting abatement

You cannot obtain penalty abatement while returns remain unfiled. File all missing returns first, then request abatement for the late-filing penalties. The IRS won't consider abatement while you're out of compliance.

Step-by-step guide to requesting penalty abatement

Step 1: Identify which penalties were assessed

Review your IRS notice to determine exactly which penalties you owe:

• Failure-to-file (5% per month)
• Failure-to-pay (0.5% per month)
• Accuracy-related (20% of underpayment)
• Estimated tax
• Information return penalties
• International information return penalties

Step 2: Determine which abatement method applies

• For failure-to-file or failure-to-pay penalties: Check if you qualify for IRS first time penalty abatement first. If not, consider reasonable cause penalty abatement.
• For accuracy-related penalties: Only reasonable cause penalty abatement applies (FTA not available).
• For international information return penalties: New IRS discretionary policy—include statement explaining circumstances.
• For estimated tax penalties: Very limited relief—generally must show unusual circumstances.

Step 3: Gather documentation

Collect all supporting evidence for reasonable cause:

• Medical records for illness/hospitalization
• Death certificates for deaths
• Correspondence showing you couldn't obtain records
• Professional advice documentation
• Disaster evidence (insurance claims, FEMA declarations)

For FTA, no documentation needed—just verify you meet the three criteria.

Step 4: Prepare your request

For FTA: Call the IRS phone number on your notice, or write a letter stating you're requesting first time penalty abatement and that you meet all three eligibility requirements.

For reasonable cause: Write a detailed statement with:

• Identifying information (name, SSN/EIN, tax year, penalty type)
• Chronological description of circumstances
• Explanation of why circumstances prevented compliance
• Description of good faith efforts
• Request for abatement
• Attached supporting documentation

Alternatively, complete Form 843 for either IRS first time penalty abatement or reasonable cause penalty abatement. Form 843 is especially useful if you've already paid the penalties and want a refund.

Step 5: Submit your request

Phone (FTA only): Call the number on your penalty notice and request FTA. Have your notice and tax return information available.

Mail: Send your written request with documentation or Form 843 to the address shown on the penalty notice. Use certified mail with return receipt to prove timely mailing.

In person: Visit an IRS Taxpayer Assistance Center with your documentation (less common but possible).

Step 6: Follow up

The IRS typically responds within 60-90 days. If you don't receive a response within 90 days, call the number on your notice to check the status.

Step 7: Appeal if denied

If your request is denied, you can:

• Appeal to the IRS Office of Appeals (file Form 12203 or written appeal)
• Provide additional documentation addressing reasons for denial
• Request Appeals officer review

Appeals officers have more experience with penalty abatement and broader authority to grant relief.

Step 8: Pay any remaining penalties

If your appeal is ultimately denied or partially granted, pay remaining penalties promptly to stop interest from accruing on the penalty amounts.

How NSKT Global can help with penalty abatement

NSKT Global specializes in IRS penalty abatement, helping businesses and individuals eliminate or reduce penalties through strategic use of first time penalty abatement, reasonable cause penalty abatement arguments, and administrative relief programs.

We offer comprehensive penalty abatement services including FTA eligibility analysis determining if you qualify for IRS first time penalty abatement and identifying optimal timing for using FTA, reasonable cause penalty abatement statement preparation drafting compelling abatement requests with detailed chronologies and supporting documentation, and Form 843 preparation completing accurate refund claims and abatement requests with proper supporting evidence.

Our penalty defense services include examination penalty defense negotiating penalty abatement during IRS audits and examinations, compliance penalty mitigation catching up delinquent filings while minimizing penalties through streamlined procedures, information return penalty relief requesting reasonable cause penalty abatement for Forms 1099, W-2, and other information return penalties, and employment tax penalty abatement addressing failure-to-deposit penalties for late payroll tax deposits.

Whether you received failure-to-file or failure-to-pay penalties but have a clean compliance history qualifying for FTA, have reasonable cause circumstances like hospitalization, disaster, or death that prevented compliance, our expertise ensures you identify all available penalty relief options saving thousands in unnecessary penalties, prepare compelling abatement requests maximizing approval chances with proper documentation and legal arguments. We help you navigate IRS appeals processes when initial requests are denied, and develop strategic approaches to penalty situations considering timing, eligible relief programs, and optimal documentation to achieve maximum abatement across all penalty types.