Can I Get Penalty Abatement If I've Never Been Late Before?

Yes, the IRS First-Time Penalty Abatement (FTA) program removes failure-to-file and failure-to-pay penalties if you have a clean compliance history for the prior three tax years. You must have filed all required returns on time (or had valid extensions) and had no penalties assessed during those three years. This is one of the most underused IRS relief provisions, and it can save Virginia taxpayers thousands of dollars.

FTA is an administrative waiver, not a formal program you apply for. You can request it by phone, in writing, or through your tax professional. The IRS grants it based on your compliance record without requiring you to prove reasonable cause.

FTA Eligibility Requirements

To qualify for First-Time Penalty Abatement, you must meet all three criteria:

1. Clean three-year history: No penalties assessed (or all prior penalties fully abated) for the three tax years preceding the penalty year. Minor estimated tax penalties generally do not disqualify you.

2. All required returns filed: You must have filed all returns currently due, or have valid extensions in place. The IRS will not grant FTA if you have unfiled returns.

3. Paid or arranged to pay: You must have paid the tax owed or be in a current installment agreement. FTA removes the penalty, not the underlying tax or interest.

What FTA Covers

FTA applies to three specific penalty types:

• Failure-to-file penalty (IRC 6651(a)(1)): 5% of unpaid tax per month, up to 25%
• Failure-to-pay penalty (IRC 6651(a)(2)): 0.5% of unpaid tax per month, up to 25%
• Failure-to-deposit penalty (IRC 6656): for employment tax deposits

It does not cover accuracy-related penalties, fraud penalties, or estimated tax penalties. For those, you need to demonstrate reasonable cause.

Example savings: A Virginia taxpayer who filed their 2025 return 10 months late with $30,000 in unpaid tax faces:

• Failure-to-file penalty: $13,500 (capped at 25% = $7,500)
• Failure-to-pay penalty: $1,500 (0.5% x 10 months)
• Total penalties: approximately $9,000
• FTA removes the full penalty amount, plus associated interest on the penalties

How to Request FTA

By phone: Call the IRS at the number on your notice. Tell the representative you are requesting First-Time Penalty Abatement under the administrative waiver. They can check your eligibility and apply it immediately.

In writing: Send a letter to the IRS service center that issued the penalty notice, citing the FTA administrative waiver and your clean three-year compliance history.

Through a professional: Your Virginia IRS penalty relief specialist or tax attorney can request FTA on your behalf, often resolving it in a single phone call.

If FTA is denied, you can still request penalty abatement under reasonable cause (illness, natural disaster, reliance on professional advice, etc.) as a backup.

What This Means for Virginia Taxpayers

FTA is especially valuable for Virginia taxpayers who are generally compliant but had one bad year: a medical emergency, job loss, divorce, or simply an oversight. The three-year lookback period means you can use FTA once every four years if needed.

Virginia does not have an equivalent automatic program for state penalties. However, the Virginia Department of Taxation does accept reasonable cause penalty abatement requests. If you qualify for federal FTA, submit a parallel reasonable cause request to Virginia using the same circumstances.

"FTA is the lowest-hanging fruit in tax resolution," says tax penalty abatement expert in Northern Virginia of Back Tax Expert Inc. in Vienna, VA. "I check every client's three-year history as a first step. If they qualify, we can eliminate thousands in penalties with a single phone call. Many Virginia taxpayers do not know this exists."

Related Questions

Can I get FTA if I already paid the penalties? Yes. You can request FTA retroactively and receive a refund of penalties already paid, as long as you are within the refund statute of limitations (generally three years from the date you paid).

Does FTA remove interest too? FTA removes interest that was charged specifically on the abated penalties. It does not remove interest on the underlying tax balance. Even so, the interest reduction can be significant.

Can I use FTA for multiple tax years at once? FTA applies to one tax period at a time. If you have penalties for multiple years, it covers only the earliest qualifying year. A tax professional can strategize which year to apply FTA to for maximum savings.

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This page is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional for guidance specific to your situation. Learn more about Virginia tax relief options.