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IRS First Time Penalty Abatement: The Free Call Most People Never Make

IRS penalties can add 20-25% to your total balance. First Time Penalty Abatement can remove them entirely — with one phone call, no professional required, completely free.

When I was dealing with $120,000 in IRS debt, a significant chunk of that balance wasn't the original tax I owed.

It was penalties.

Failure-to-pay penalties. Failure-to-file penalties. Interest on penalties. Penalties on penalties.

By the time I looked at the full number, roughly $28,000 of what I owed was penalties and interest — not the original tax liability.

What nobody told me — and what most debt relief companies won't tell you before they charge you $5,000 — is that a large portion of those penalties can be removed for free with a single phone call.

It's called First Time Penalty Abatement.

What Is First Time Penalty Abatement?

First Time Penalty Abatement (FTA) is an IRS administrative waiver that removes certain penalties for taxpayers who have a clean compliance history.

It was introduced as part of the IRS's Fresh Start Initiative and is one of the most underused tools available to taxpayers with IRS debt.

The IRS doesn't advertise it. Debt relief companies don't tell you about it — because if you knew, you wouldn't need them.

If you have IRS penalties and a clean 3-year compliance history, you may qualify to have ALL penalties removed for free. This takes one phone call and costs nothing.

Who Qualifies?

You may qualify for First Time Penalty Abatement if you meet ALL three of these conditions:

✓You have no penalties in the 3 tax years before the year you're requesting abatement for
✓You have filed all required tax returns (or filed a valid extension)
✓You have paid — or arranged to pay — any tax currently due

That's it. No income limit. No asset test. No complicated application. Just a compliance history check.

Which penalties does FTA cover?

✓Failure-to-file penalty (5% per month, up to 25%)
✓Failure-to-pay penalty (0.5% per month, up to 25%)
✓Failure-to-deposit penalty (for business payroll taxes)

✗Does NOT cover interest (interest is not a penalty and cannot be abated through FTA)
✗Does NOT cover the Trust Fund Recovery Penalty

How much could this save you?

On a $50,000 IRS balance:

Failure-to-file penalty (25% max): up to $12,500
Failure-to-pay penalty (25% max): up to $12,500
Combined: up to $25,000 removed for free

On a $120,000 IRS balance:

Up to $60,000 in penalties potentially removed

These are the maximum amounts — your actual penalties depend on how long they've been accruing. But even partial abatement can save thousands.

The Exact Call — Word for Word

Call the IRS at 1-800-829-1040

When you reach a representative:

"I'd like to request First Time Penalty Abatement for tax year [year]. I have filed all required returns and have a clean compliance history for the three prior tax years. I'm requesting abatement under IRM 20.1.1.3.6.1."

Why cite the IRM reference?

IRM 20.1.1.3.6.1 is the Internal Revenue Manual section that governs First Time Penalty Abatement. Citing it signals to the representative that you know what you're asking for.

IRS representatives respond differently when they know a taxpayer has done their research. It's not required — but it helps.

What to have ready before you call:

✓The specific tax year you're requesting abatement for
✓Your Social Security Number or EIN
✓Confirmation that all required returns are filed
✓Your current balance (from IRS.gov or a recent notice)
✓Patience — IRS hold times can be 30-60 minutes

Best time to call:

Call Tuesday through Thursday, early morning (7am-9am local time). Monday and Friday are the busiest days. Early morning has shorter hold times.

What If They Say No?

Don't give up on the first no.

Ask for the reason.

The representative must tell you why your request was denied. Common reasons:

You had a penalty in the prior 3 years (you don't qualify)
The return wasn't filed (you must file first)
The information in their system doesn't match what you provided

Ask for a supervisor.

FTA denials are sometimes reversed on first escalation. Be polite but persistent. Say: "I'd like to speak with a supervisor to review my abatement request."

Submit in writing.

If the phone call doesn't work, submit a written request to the IRS address on your most recent notice. Reference IRM 20.1.1.3.6.1 and include your compliance history documentation.

FTA vs. Reasonable Cause Abatement

FTA is the easiest abatement to get — it's administrative, meaning the IRS applies it based on your compliance history without requiring you to prove why you didn't pay.

But FTA only applies to one tax year at a time (the most recent year with penalties).

If you have penalties across multiple years, you can also request Reasonable Cause Abatement for additional years — but this requires you to demonstrate a legitimate reason you couldn't comply (serious illness, natural disaster, death in the family, etc.).

The strategy: Use FTA for the year where it saves the most. Then evaluate reasonable cause for other years.

What About After FTA?

Once penalties are removed, you have a cleaner picture of what you actually owe — just the original tax plus remaining interest.

From there your options open up:

If balance is under $50,000:

Set up a Streamlined Installment Agreement online at IRS.gov in 10 minutes. No financial disclosure required.

If balance is over $50,000:

Request an Installment Agreement with financial disclosure (Form 433-F). Your allowable living expenses may reduce your required monthly payment significantly.

If balance is significantly lower after FTA:

Re-run your OIC eligibility. A lower balance changes the math on whether an Offer in Compromise makes sense.

My Experience

When I dealt with my $120,000 IRS balance, I requested First Time Penalty Abatement before pursuing anything else.

The call took about 45 minutes including hold time. The representative reviewed my compliance history and approved partial abatement on the spot.

It didn't eliminate everything — I had penalties across multiple years and FTA only covered one. But it reduced my balance meaningfully before I even started the OIC process.

More importantly: it cost nothing. No professional. No fee. One phone call.

That's the point of The Debt Playbook. The information exists. It's just not organized anywhere useful — and nobody who benefits from you not knowing will tell you.

— Francis N., Founder of The Debt Playbook

The Bottom Line

If you have IRS penalties:

1
Check if you have a clean 3-year compliance history
2
Call 1-800-829-1040
3
Request FTA under IRM 20.1.1.3.6.1
4
If denied, escalate to a supervisor
5
Use the reduced balance to evaluate your next step

This is free. It takes one phone call. Most people with IRS debt never try it because nobody tells them it exists.

Now you know.

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The information on this page is for educational purposes only and does not constitute legal or tax advice. IRS programs and procedures change over time. Always verify current information at IRS.gov. For complex situations, consult a licensed Enrolled Agent or tax attorney.

Francis N. is the founder of The Debt Playbook and eliminated $516,000 in personal and business debt over 18 months without paying a single professional.