Upcoming IRS Change: Automatic First-Time Penalty Abatement (FTA) for 2025 Tax Filing Year

Starting with 2025 tax returns filed in 2026, the IRS will begin automatically applying first-time penalty abatement for taxpayers who qualify—no request necessary.

FTA is an administrative waiver that applies to certain penalties, including:

• • Failure-to-file
  • Failure-to-pay
  • Failure-to-deposit

To qualify, taxpayers must:

• • Be current with all required filings
  • Have paid or arranged for payment of any tax liabilities owed
  • Have a clean penalty history for the prior three years (excluding estimated tax penalties)

Previously, taxpayers had to know about and actively request FTA, which caused many (particularly lower-income individuals) to miss out on relief for which they were they were eligible.

The IRS estimates that over one million taxpayers annually qualified for FTA but didn’t receive it due to lack of awareness and it has spent several years preparing for automatic implementation by flagging qualifying taxpayer histories and eliminating the need for manual review. While some technical issues (like defining “reasonable cause” exceptions) are still being finalized, the system is expected to be in place by April 15, 2026 (the first deadline when penalties would apply). This change simplifies a once-obscure process and may significantly benefit eligible taxpayers by reducing unexpected penalties—especially those who file late for the first time.