What is First Time Penalty Abatement and how do I qualify?

First Time Penalty Abatement (FTA) is an IRS administrative waiver that removes failure-to-file and failure-to-pay penalties for a single tax period. To qualify, you must meet three criteria: (1) you haven't had penalties in the prior three tax years (or any penalties were removed for a different reason), (2) you've filed all required returns or filed an extension, and (3) you've paid or arranged to pay any tax due. FTA can save thousands of dollars since the failure-to-file penalty alone can be up to 25% of unpaid tax. You can request FTA by calling the IRS at 1-800-829-1040 and asking the agent to apply it, or by writing a letter citing the First Time Abatement administrative waiver. Many IRS phone agents can apply FTA immediately during the call. If the IRS denies FTA, you can still request penalty abatement under 'reasonable cause' standards. FTA is one of the most underused tax relief tools available, and many taxpayers who qualify don't know it exists.