Penalty Relief After A Tough Year: First Time Abatement Vs. Reasonable Cause

Facing IRS penalties can be stressful, especially after a tough year. For such cases, the first-time penalty abatement gives eligible taxpayers a quick way to remove penalties and get a fresh start. 

This guide explains how to use first-time penalty abatement or reasonable cause penalty relief to reduce IRS penalties. Understand the eligibility, documentation, and tips to increase your chances of approval.

The Two Main Ways To Remove IRS Penalties

IRS penalties are common and can grow quickly, even if you owe only a small amount. The two main ways to reduce or remove penalties are first-time penalty abatement for taxpayers with a clean history and reasonable cause relief for those facing unavoidable events.

Key points:

• Many people get penalties each year for filing or paying late, or making mistakes.
• Penalty relief reduces or removes the penalty, but you still owe the tax.
• First-time penalty abatement is for those with a strong, penalty-free record.
• Picking the right option is important. Choosing the wrong one can lead to denial.

Understanding these two options is the first step before learning how first time penalty abatement and reasonable cause relief actually work.

First Time Abatement (FTA): The one-time pass for a clean history

First-time penalty abatement is the easiest and fastest way to get IRS penalty relief. It is for taxpayers who usually follow tax rules but made a single mistake.

• The IRS does not require hardship explanations or supporting documents.
• The IRS reviews your tax history to confirm it was a one-time issue.
• Many people also call this the IRS one-time abatement, which is the same program.

This relief commonly applies to:

• Failure-to-file penalties
• Failure-to-pay penalties
• Failure-to-deposit penalties (for businesses)

If you qualify, the IRS often approves it over a phone call, making first-time penalty abatement a quick and efficient option.

Reasonable Cause: The hardship defense for unavoidable events

Reasonable cause penalty relief is for taxpayers who could not comply with IRS rules despite their best efforts. Unlike first-time penalty abatement, it focuses on life circumstances rather than your tax history.

• It applies when serious events like illness, death, or disasters prevent timely filing or payment.
• This option is more flexible but requires a clear explanation and strong proof.
• If you don’t qualify for an IRS one-time abatement, reasonable cause relief offers an important alternative for removing penalties.

First Time Abatement (FTA): Do You Qualify?

Eligibility for first-time penalty abatement is simple and based on clear rules. The IRS does not consider personal hardship or reasons for the mistake. It only checks if you meet certain criteria.

• Approval rates are high when you clearly meet the rules.
• Knowing these requirements before contacting the IRS can save time and make your request easier.

The first step is to see if you qualify before checking rules like the 3-year lookback and making sure your taxes are up to date.

The 3-year lookback rule: No penalties in the prior 3 tax years

The most important rule for first-time penalty abatement is the three-year lookback. The IRS checks the three tax years before the year of the penalty to make sure no penalties were assessed.

To qualify:

• You must have no penalties in those three years.
• Even small or forgotten penalties count.
• The IRS records, not your memory, decide eligibility.

For example, to get relief for 2025, you must have no penalties in 2022, 2023, and 2024. This rule makes sure first time penalty abatement is only for taxpayers with a clean record.

Compliance check: All returns filed and taxes paid (or in a plan)

Before granting first-time penalty abatement, the IRS requires that your tax filings and payments be up to date. This means:

• All required tax returns must be filed.
• Taxes must be paid in full, or
• You are on an approved installment agreement.

Having unpaid taxes doesn’t prevent you from getting relief. If you’re on a payment plan, the IRS can still approve an IRS one-time abatement. Just make sure your tax returns are filed, and payments are up to date, and your 3-year record is clean.

Reasonable Cause: When Life Happens (And You Have Proof)

If you don’t qualify for first-time penalty abatement, reasonable cause penalty relief is the next option. It helps taxpayers who were unable to meet IRS requirements due to serious life events. The IRS looks at:

• What happened
• When it happened
• How does it prevent you from filing or paying on time

Unlike an IRS one-time abatement, reasonable cause is based on your circumstances and requires proper documentation, so careful preparation is essential.

Acceptable reasons: Illness, death, disaster, or lost records

The IRS may grant reasonable cause penalty relief if unexpected events prevented you from filing or paying on time. Typical examples include:

• Serious illness or hospitalization
• Death of an immediate family member
• Natural disasters like floods or fires
• Theft or loss of important records
• Military deployment

To qualify, you must clearly show that the event made it impossible to file or pay on time.

The Ordinary Business Care standard: Proving you tried to comply

The IRS wants to see that you acted responsibly, even if you missed a deadline. This is called ordinary business care and caution. To show this, you should:

• File or pay as soon as possible
• Get professional help if needed
• Fix the problem quickly once it happens

Showing these efforts can improve your chances of getting reasonable cause penalty relief, even if you were late.

Also Read: Does an Offer in Compromise Affect Credit

How To Request Penalty Relief Successfully

The first step is knowing which penalty relief to use. How you request it also matters. The IRS accepts requests by phone or in writing, depending on the type of relief you need.

Phone vs. Form 843: When a call works and when you need a letter

For first time penalty abatement or IRS one-time abatement, a phone call is often the fastest way to request relief, as IRS agents can check eligibility and remove penalties immediately.

Use Form 843 for:

• Reasonable cause penalty relief
• More complex situations
• Requests that need supporting documents

Written requests take more time but let you include detailed explanations and proof, which is important for penalty relief based on serious events.

Writing the narrative: Connecting the specific dates to the event

When requesting reasonable cause penalty relief, your explanation should be short and factual and include dates. Clearly state:

• The type of penalty and the tax year
• What happened
• How did it prevent you from filing or paying on time
• When you fixed the issue

Keep your explanation factual and clear, focusing on dates and proof rather than personal difficulties.

Also Read: How Far Back Can the IRS Do an Audit

What To Do If Your Request Is Denied

A denial does not mean you can’t get relief. Many requests are denied because of missing information, unclear explanations, or misunderstandings about eligibility. Sometimes, a denial just means the IRS needs more details or proper documentation.

The Appeals process: Requesting a conference

If your penalty relief request is denied, you usually have 30 days to appeal. An independent IRS department reviews appeals, which makes the process more objective. Providing extra evidence or clearer explanations can often lead to approval, especially for reasonable cause penalty relief cases.

When professional help changes the outcome

Hiring a tax professional can greatly improve your chances of success, especially when:

• Penalties are large
• Multiple tax years are involved
• Appeals are needed
• IRS records are complex

Experts at Hall & Associates Tax Relief can help you understand how first-time penalty abatement, IRS one-time abatement, and reasonable cause penalty relief work and guide you step by step to get relief from IRS penalties.

Conclusion

First-time penalty abatement provides a quick solution for eligible taxpayers, while reasonable cause relief helps those facing serious life events. Choosing the right option and preparing your request carefully can increase your chances of approval and reduce IRS penalties.

Struggling with IRS penalties?
Contact tax relief specialists at Hall & Associates Tax Relief today for expert help with penalties and be stress-free.