FTA is not in the Internal Revenue Code. It is an administrative waiver established under the Internal Revenue Manual at IRM 20.1.1.3.6.1 — a procedural commitment by the IRS to abate certain penalties on the basis of a clean compliance record, without requiring the taxpayer to prove reasonable cause.

The three-year lookback

The taxpayer qualifies for FTA if, for each of the three tax years preceding the year of the penalty:

  • All required returns were filed on time (or filed within an extension)
  • No penalties were assessed (other than penalties later abated for reasonable cause)
  • The taxpayer is current with any required estimated payments

A single late filing or assessed penalty in the lookback window disqualifies the year. However, prior-year penalties that were themselves abated for reasonable cause do not count against FTA — only those that stuck.

— The Stack Order Matters —

If a taxpayer qualifies for both FTA and reasonable cause for the same penalty, FTA should generally be claimed first. FTA is procedural — fast, paper-thin, no risk. Reasonable cause is fact-intensive and reviewed in detail. Saving the reasonable-cause argument means it stays available as a fallback if FTA is rejected, or for a future year if needed.

Which penalties qualify

FTA applies only to certain penalty types:

  • Failure-to-File (§6651(a)(1)) on income tax returns
  • Failure-to-Pay (§6651(a)(2)) on income tax balances
  • Failure-to-Deposit (§6656) on employment tax deposits

FTA does not apply to accuracy-related penalties (§6662), fraud penalties (§6663), the estimated-tax penalty (§6654/§6655), most information-return penalties (§6721/§6722), or the Trust Fund Recovery Penalty.

How to request FTA

  1. Confirm lookback compliance. Pull IRS transcripts (Form 8821 authorization) for the three prior years and confirm clean filing history.
  2. File Form 843. Check the box for "Penalties" on Line 5a, enter the IRC section assessed, and state "Request for First-Time Penalty Abatement under IRM 20.1.1.3.6.1" on Line 7. No reasonable-cause statement is required.
  3. Submit and follow up. Form 843 is mailed (wet signature) to the IRS service center for your state. Most FTA requests resolve in 30–90 days.

In simple cases, FTA can be requested by phone — but the call requires the taxpayer or representative to verify identity, articulate the request, and follow up if the IRS does not process it. For business penalties, the written Form 843 is the cleaner record.

Authority
Internal Revenue Manual 20.1.1.3.6.1
Eligible Penalties
FTF (§6651(a)(1)) · FTP (§6651(a)(2)) · FTD (§6656)
Lookback Requirement
3 prior tax years compliant — no unfiled returns or penalty assessments
Substantiation
None required — administrative waiver
Filing Method
Form 843 · IRS phone call · written request
Frequency
Once per tax-type per qualifying lookback period

The refund, if penalties were already paid

When FTA is granted on a penalty the taxpayer already paid, the IRS refunds the penalty plus the interest that was charged on it. The refund is issued within 60–120 days of approval, typically by check.