IRS Will Automatically Waive First-Time Late Penalties Starting This Filing Season
If this is your first time facing an IRS late-filing, late-payment, or late-deposit penalty, the IRS will likely wipe it out without a phone call or a Form 843. The relief is called First-Time Abate (FTA), and when your account history shows you qualify, the IRS is instructed to apply it automatically. Interest tied to the removed penalty is reduced or removed at the same time.
According to the IRS, FTA is available to taxpayers with a clean three-year compliance record who get hit with one of these penalties:
- Failure to File (Form 1040, partnership, or S corporation returns)
- Failure to Pay (tax shown on the return or assessed in a notice)
- Failure to Deposit (employment tax deposits for business filers)
Here is exactly who qualifies, what the waiver does not cover, and why the biggest expat penalties still sit outside the program.
One Late Return Does Not Have to Cost You.
What Is First-Time Abate?
First-Time Abate is an administrative waiver that the IRS uses to remove a single penalty for taxpayers who otherwise have a clean compliance history. It is not new, but the IRS has expanded automatic application so that when its records confirm eligibility, the relief is applied without a formal request.
FTA covers three specific penalty types. It does not cover accuracy-related penalties, fraud penalties, the estimated tax penalty, or any FBAR penalty.
Which Penalties Are Eligible?
| Penalty | Applies To | Covered by FTA? |
|---|---|---|
| Failure to File | Form 1040, Form 1065 (partnership), Form 1120-S (S corp) | Yes |
| Failure to Pay | Tax on the return or assessed in an IRS notice | Yes |
| Failure to Deposit | Employment tax deposits | Yes |
| Accuracy-related (20%) | Substantial understatement, negligence | No |
| FBAR (FinCEN Form 114) | Foreign account reporting | No |
| Form 3520, 5471, 8865, 8938 | Foreign gifts, trusts, corporations, partnerships, assets | No |
| Estimated tax penalty | Underpayment of quarterly estimates | No |
Who Qualifies for First-Time Abate?
To qualify, you need a history of good tax compliance. The IRS defines that as meeting all of the following:
- Filed the same return type (or were not required to) for the three tax years before the year at issue
- No penalties during those three prior years, other than an estimated tax penalty or a penalty that was later removed for an acceptable reason
- Current on all required returns or on a valid extension
For Failure to Deposit penalties specifically, you also need fewer than four FTD waiver codes in the prior three years, and the penalty cannot be tied to avoidance.
Important to know: you can still request FTA even if you have not fully paid the tax owed. Full payment is not a condition. Interest will continue to accrue on the unpaid tax until it is paid in full, but the penalty itself can still be waived.
What FTA Does Not Apply To
This is where many expats get blindsided. First-Time Abate does not apply to:
- Event-based filing requirements (returns triggered by a specific event rather than an annual cycle)
- Estate tax returns
- Information reporting that depends on another filing
That exclusion knocks out most of the high-dollar international reporting forms expats deal with, including Form 3520 (foreign gifts and trusts), Form 5471 (foreign corporations), Form 8865 (foreign partnerships), and Form 8938 (specified foreign financial assets). Penalties on those international information returns start at $10,000 and are outside FTA’s reach.
Who This Affects
First-Time Abate is most relevant to:
- Late filers who missed April 15 for the first time
- Self-employed taxpayers hit with a failure-to-pay penalty on Schedule C income
- Partnerships and S corporations with a first late-filing penalty
- Small business owners with a first employment tax deposit miss
- Americans abroad who missed the June 15 automatic extension
- Expats catching up through Streamlined Filing who also have a current-year penalty
What It Means for Americans Abroad
For Americans living abroad, FTA is helpful but narrower than it sounds.
A first-time late penalty on your Form 1040 can be removed without a fight. That is real relief and includes taxpayers who missed the June 15 expat extension. Interest on the removed penalty is automatically applied.
But the waiver does nothing for the penalties that cause the most damage to expats. FBAR penalties are administered by FinCEN and sit entirely outside FTA. International information return penalties (3520, 5471, 8865, 8938) are excluded as event-based or dependent filings. If your real exposure is foreign account or foreign entity reporting, FTA is not your solution. The Streamlined Filing Compliance Procedures or the Delinquent FBAR Submission Procedures are.
What You Should Do Next
- File your return by April 15, 2026 (or June 15, 2026 if your tax home is outside the U.S.), even if you cannot pay in full.
- Check your IRS online account transcript after filing to confirm whether FTA was applied.
- If FTA was not applied and you believe you qualify, request it by calling the IRS number on your notice or by filing Form 843, Claim for Refund and Request for Abatement.
- If you do not qualify for FTA, the IRS will automatically consider Reasonable Cause relief. Document any circumstances outside your control that caused the late filing or payment.
- If you have FBAR or international form exposure, FTA will not help. Get expert guidance on Streamlined Filing or the delinquent information return procedures.
Where Greenback Fits In
First-Time Abate is good news for taxpayers with a clean record and a simple slip. It is also one of the most misunderstood relief programs in the tax code, especially for Americans with foreign accounts, foreign entities, or unfiled returns from multiple years. Knowing when FTA applies, when it does not, and when to save it for a bigger year is exactly the kind of judgment call a dedicated expat CPA or Enrolled Agent handles every day.
Greenback helps Americans abroad handle late filings, penalty relief, FBAR catch-up, and international information returns from start to finish. Learn more about filing taxes late as an expat, get dedicated help for late filers, or see everything to know about Streamlined Filing.
If you’re ready to be matched with a Greenback accountant, click the Get Started button below. For general questions on U.S. expat taxes or working with Greenback, contact our Customer Champions.
Not Sure If You Qualify?
Frequently Asked Questions
No. FBAR penalties are administered by FinCEN and are entirely outside the IRS penalty system. Form 3520, 5471, 8865, and 8938 penalties are also excluded because they are treated as event-based or dependent filings. Those are the highest-dollar expat penalties, and they require a separate relief path, typically Streamlined Filing or delinquent international information return procedures.
Yes. The IRS explicitly allows FTA requests on accounts with unpaid tax. The penalty can be removed even if you still owe the underlying tax. Interest will continue to accrue on the unpaid balance until it is paid, but the penalty removal still stands.
Yes. Failure-to-file penalties on Form 1065 (partnership) and Form 1120-S (S corporation) returns are eligible for First-Time Abate under the same three-year clean history rule. This matters for self-employed expats who run a partnership or S corp and miss a deadline.
Yes. If you request penalty relief and the IRS determines you do not qualify for First-Time Abate, it will consider whether Reasonable Cause relief applies and notify you of the result. Reasonable Cause requires a written explanation of the circumstances that prevented timely filing or payment, such as serious illness, natural disaster, or inability to obtain records.
Pull your IRS account transcript from your online IRS account. Look for the penalty assessment followed by a reversal coded as an abatement. If the reversal is not posted within a few weeks of the assessment, request FTA directly by calling the IRS or filing Form 843.
Yes. If you receive a notice saying FTA was denied, you can follow the penalty appeal instructions included with the notice. You have the right to request a review through IRS Appeals, an independent function within the agency.
This article is for informational purposes only and does not constitute tax, legal, or financial advice. Consult a qualified tax professional for guidance specific to your situation.
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