IRS first-time penalty abatement: automatic in 2026
The IRS administrative penalty waiver for first-time abatement (FTA) has been in existence since 2001. In the past, tax professionals and taxpayers had to write or call the IRS to request the waiver. Starting in 2026, taxpayers who qualify for FTA will automatically receive the abatement from the IRS.
First-time abatement (FTA) overview
The requirements and effective uses of FTA were covered extensively in the September 2025 edition of NATP’s TAXPRO. FTA applies to two of the most common penalties: failure to file and failure to pay. It can also apply to business taxpayers with employment tax obligations for failure to deposit penalties.
To qualify and use FTA, the tax pro must follow these criteria:
|
Factor |
Qualification criteria |
| Qualifying taxpayers and returns |
Only individual, business, and payroll tax returns:
Not applicable: event-based returns (estate, gift) and information returns (W-2s, 1099s, 3520, 5471, etc.). Does not apply to Form 990 series. |
|
Applicable penalties that can be abated |
Only 3 types of IRS penalties:
Common penalties not subject to FTA: accuracy and estimated tax penalties. |
| Penalty history |
Clean compliance history, defined as:
Any penalties abated and "coded" on IRS systems for "reasonable cause" or for a prior administrative waiver (such as the failure to pay relief provided for 2020 and 2021 returns) in the prior three years should not disqualify the taxpayer from FTA. |
|
Outstanding balances |
If the taxpayer owes back taxes and is in good standing, they are in agreement with the back balances owed. For example, the taxpayer is in a payment plan and is current on payments. |
|
Filing compliance |
All required returns have been filed. According to IRM 20.1.1.3.3.2.1 at (5) (3-29-2023), the taxpayer must have filed, if required, the past three years’ returns prior to the penalty year. In the case of a married filing joint return, both the primary and secondary taxpayers must have filed their prior three years of required returns. |
|
Amount that can be abated |
There is no dollar limitation on the amount that can be abated. |
|
How to request |
Any amount can be abated in writing, via IRS Form 843, or by phone. You cannot request FTA currently using IRS online tools or account features. |
|
Abatement periods |
Limited to only the first period penalties only (i.e., Form 1040 – first year). |
|
Timing |
The taxpayer must request abatement within the refund statute of limitations (that is, three years from the due date of the return, or two years after the tax is paid, whichever is later). |
Many taxpayers and tax professionals were unaware of FTA. As a result, millions of qualifying penalties are not abated each year. In fact, the Treasury Inspector General for Tax Administration (TIGTA), IRS advisory groups, tax industry associations and the Taxpayer Advocate provided recommendations for the IRS to apply the FTA waiver to all taxpayers uniformly. To that end, these groups pushed for the IRS to “automatically” apply FTA when the criteria were met.
Automatic FTA waivers in 2026
Over the past few years, the National Taxpayer Advocate pushed for the automatic FTA waiver. In late 2024, the NTA stated that the IRS had planned to provide the waiver automatically to all who qualified. IRS cutbacks and the government shutdown created uncertainty if the IRS could implement automatic FTA in 2026. However, Erin Collins announced on Nov. 21, 2025, that automatic FTA will occur in 2026.
Your Action Items
FTA is simple to qualify for and obtain from the IRS. Tax professionals should be on the alert in 2026 for IRS updates on how they will apply FTA, and for any situations where automatic FTA was not applied. In the past, the IRS provided COVID-19 related administrative waivers for the failure to file penalties for 2019 and 2020 tax years and the failure to pay penalties for 2020 and 2021 tax years. In some circumstances, the abatement was not applied automatically and tax professionals had to request it directly from the IRS.
Also, tax pros should review their client’s IRS account information to see if they qualify for FTA in the past. If so, the tax pro can obtain Form 2848, Power of Attorney, and contact the IRS directly to obtain the waiver.
TIGTA has provided data in the past to show that only a small percentage of taxpayers have taken advantage of FTA. With the implementation of automatic FTA in 2026, taxpayers are set to not miss out on this important use-it or lose-it penalty relief waiver.
About the author(s)
Jim Buttonow, CPA, CITP