Playbook
Penalty abatement from the practitioner’s side
Short answer
First-time abatement removes failure-to-file, failure-to-pay, and failure-to-deposit penalties for one period when the taxpayer had no significant penalties in the prior three years and is otherwise compliant. Reasonable-cause relief covers other situations, such as serious illness or disaster, and needs documentation. Practitioners usually request FTA by phone first.
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How do the two kinds of relief compare?
| Question | First-time abatement | Reasonable cause |
|---|---|---|
| What qualifies | Clean three-year history and current compliance | Facts showing ordinary care and inability to comply |
| Evidence needed | Minimal; based on the record | Documents supporting the circumstances |
| How to request | Phone, letter, or Form 843 | Letter or Form 843 with support |
| Penalties covered | Failure to file, pay, deposit | Many penalties, case by case |
Where does it fit in a resolution case?
Early. Abatement reduces the balance before you calculate a payment plan or offer. Transcripts show which periods carry penalties and whether the prior three years were clean.
Questions practitioners ask
- Does abatement remove interest too?
- Interest on an abated penalty is reduced along with it. Interest on the underlying tax generally is not abated.
- Can FTA be used more than once?
- It applies to a single tax period. The three-year look-back means it rarely applies to consecutive years.