The biggest first-time abate (FTA) mistake is choosing a penalty-relief route before checking the tax period. For eligible original returns beginning with tax year 2025 and eligible 2026 quarterly returns, the IRS says it is replacing request-based FTA with an Automatic Exemption from Penalty (AEP). FTA still matters for other eligible periods, including returns not considered under AEP. Neither route covers every penalty, and failing FTA eligibility does not automatically establish reasonable cause.
Start with the period: does FTA or AEP apply?
Under the IRS’s published transition guidance, FTA is relief a taxpayer requests after a penalty is assessed; AEP is applied automatically to eligible returns, so eligible penalties are not assessed. The IRS says it will send a notice if AEP is applied. AEP is described for eligible original returns beginning with tax year 2025, eligible 2026 quarterly returns, and future periods. FTA remains relevant for eligible earlier periods and for eligible 2025 tax-year and 2026 quarterly returns not considered under AEP. Check the actual return, period, and account rather than assuming every return in a year follows the same route. IRS: Administrative penalty relief; IRS: Automatic penalty relief for eligible taxpayers.
| Question | FTA | AEP |
|---|---|---|
| How relief works | The taxpayer requests relief; an assessed penalty may later be removed. | The IRS automatically applies relief to eligible returns; eligible penalties are not assessed. |
| Periods described by the IRS | Eligible earlier periods, including eligible 2025 tax-year and 2026 quarterly returns not considered under AEP. | Eligible original returns beginning with tax year 2025, eligible 2026 quarterly returns, and future periods. |
| Taxpayer action | Request relief from the IRS. | No application when eligible; the IRS says it will send a notice if AEP is applied. |
| Scope | Eligibility and covered penalty rules still apply. | Not every return or penalty qualifies. |
The IRS describes a current transition, so use its latest guidance and the client’s notice when a return falls near the boundary or its eligibility is unclear.
Check FTA eligibility against the actual account history
FTA is not a universal one-time waiver triggered simply by having no recent penalty. The IRS describes a lookback based on timely filing of the same return type for the prior three years, or 12 consecutive quarters for quarterly returns, along with an acceptable penalty history and other conditions. This means the review is return-type-specific: do not substitute a general impression of the client’s compliance for the relevant account history. The IRS says it reviews account information for an FTA request, and its manual cautions that staff may need to verify applicable account modules. IRS: Administrative penalty relief; Internal Revenue Manual: Penalty relief.
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Confirm the penalty is within FTA’s scope
FTA covers qualifying failure-to-file, failure-to-pay, and failure-to-deposit penalties. The IRS identifies exclusions, including returns filed once or infrequently, the Daily Delinquency Penalty, and information reporting penalties that depend on another filing. Identify the penalty named on the notice and verify that it is one the FTA rules cover before preparing a request.
Apply the additional business deposit checks
For business returns, the general lookback is not the whole analysis. The IRS adds restrictions involving prior failure-to-deposit penalty waivers and a penalty for avoiding the Electronic Federal Tax Payment System (EFTPS). A business may therefore fail an additional deposit-related condition even when its broader filing history appears to meet the lookback.
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Separate AEP from an FTA request
If the return may qualify for AEP, do not file an FTA request as though AEP were an application process. The IRS describes AEP as automatic when eligibility criteria are met. If AEP does not apply to the return, assess FTA under its separate criteria and follow the notice or current IRS instructions.
FTA and reasonable cause are different routes
Not qualifying for FTA does not prove that reasonable-cause relief is available. Reasonable cause is a separate, fact-specific analysis: the IRS considers the circumstances and whether the taxpayer exercised ordinary care and prudence. Circumstances that may support relief include fires or natural disasters, inability to obtain records, death or serious illness, unavoidable absence, and certain system issues. IRS: Penalty relief for reasonable cause.
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For FTA
The IRS says an FTA request does not have to be labeled “FTA” and does not require supporting documents for the FTA review; the agency checks account information to determine eligibility. Its published request methods are calling the number on the notice or submitting a written statement or Form 843. Keep the notice and relevant account records, and follow the notice and current form instructions. IRS: Administrative penalty relief.
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For reasonable cause
Explain what happened and when, how it prevented timely filing or payment, and what steps the taxpayer took to comply. The IRS lists possible supporting records such as hospital or court documents, disaster records, correspondence, receipts, and forms. Include evidence tied to the specific circumstances rather than relying on a generic explanation. IRS: Penalty relief for reasonable cause.
If the IRS denies relief
A denial may have an appeal route in eligible cases. Check the notice for the applicable deadline and instructions, and use the IRS’s appeal guidance to determine whether the case can be appealed. Do not assume that every denial or request type has the same process. IRS: Penalty appeals.
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A practical review sequence for CPAs
- Identify the return. Record the tax period, return type, and whether it is an original or quarterly return.
- Read the notice. Confirm the penalty type and the IRS action already taken.
- Test the transition rule. Determine whether the return falls within AEP’s eligible periods and whether AEP was applied; do not treat AEP as a taxpayer-requested waiver.
- For an FTA candidate, verify the account history. Check timely filing for the same return type over the stated three-year or 12-quarter lookback, penalty history, and other conditions.
- For a business, check deposit-specific restrictions. Review prior failure-to-deposit waivers and the EFTPS-avoidance penalty issue.
- Assess reasonable cause independently. If FTA does not fit, determine whether the facts support a separate reasonable-cause request; do not presume it does.
- Use the correct route and calendar the response. Follow the notice’s contact, submission, and appeal instructions and retain the relevant records.
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