Even careful taxpayers can occasionally miss a filing deadline, make a late payment, or slip up on a payroll deposit. The IRS’s First-Time Abatement (FTA) program has long provided relief for taxpayers with a clean compliance history, helping them avoid certain penalties for an isolated mistake.
Now, making things even more streamlined, the IRS plans to automatically apply FTA for all qualifying taxpayers starting in 2026. This eliminates the need for routine requests from clients or practitioners.
For taxpayers and tax pros alike, this is a win! Less time will be spent on routine penalty relief, and more time can be focused on complex client matters. Even with this modernized approach, firms still need strong processes to monitor compliance history, confirm that automatic abatements are applied correctly, and catch any issues that might fall through the cracks.
Taking a step back, let’s look at the FTA program itself. FTA has been around since 2001 as a way for the IRS to give taxpayers with a strong compliance history a break on certain penalties. It isn’t based on statute but on IRS administrative guidance, giving the agency discretion to waive penalties when taxpayers have generally stayed on top of their filings and payments.
FTA applies to three of the most common penalties:
These penalties often come from simple oversights or temporary cash-flow hiccups. They can add up fast, which is why having a streamlined way to get relief can make a big difference for both individual and business clients.
To qualify for First-Time Abatement, a taxpayer must meet all of the following:
And as they typically do, the IRS interprets these rules strictly. For tax firms, this means eligibility depends on accurate, up-to-date transcript data—not assumptions.
Unlike their past approach, the IRS recently announced that they will begin automatically applying FTA relief in qualifying situations.
Automatic FTA means:
However, because FTA is applied automatically, the IRS will use it before evaluating reasonable cause. This can potentially disadvantage taxpayers who would prefer to reserve their FTA and instead pursue reasonable cause relief.
Even with automation, tax pros should stay diligent and verify that abatements are applied correctly. Early on, the rollout could have some system hiccups that cause eligible penalties to be missed, so reviewing client accounts proactively is still important.
Automation does not eliminate the need for strong practice management. The IRS is also prone to errors. Hence, tax professionals should:
1. Check FTA eligibility during intake
Every new client with penalties should be evaluated for FTA to unlock immediate new business opportunities.
2. Monitor transcripts continuously
Ensure that automatic abatements are applied and catch any penalties that might slip through during the transition.
3. Educate clients on compliance
A single missed filing or payment can disqualify a client for three years, so maintaining clean records is critical.
4. Pay close attention to payroll clients
Failure-to-deposit penalties can be substantial. Automatic FTA is particularly valuable here, but only for compliant taxpayers.
TaxNowPRO was designed for firms that need continuous visibility into client accounts. Features that make managing FTA easier include:
Automatic FTA is a big win for both taxpayers and tax pros. That said, compliance history, accurate transcripts, and proactive monitoring are still key, especially during the transition. Firms that put strong workflows in place now can resolve penalties faster, improve client outcomes, reduce staff workload, and open the door to more advisory opportunities.
With TaxNowPRO handling transcript review and real-time monitoring, staying on top of FTA has never been easier.
Resource Acknowledgment:
This blog was informed by reporting from Accounting Today, the National Association of Tax Professionals (NATP), and the IRS Taxpayer Advocate Service regarding the First-Time Abatement program and upcoming automation.
