For many taxpayers and business owners, IRS penalties can quickly turn a manageable tax issue into a significant financial burden. Whether it’s a late filing penalty or a late payment penalty, these added costs often feel disproportionate—especially when the mistake was a one-time oversight. Now, a new proposal from the American Institute of Certified Public Accountants (AICPA) could signal meaningful change.
The IRS currently offers a program known as the First-Time Abatement (FTA), which allows qualifying taxpayers to have certain penalties removed if they have a history of compliance. In simple terms, if you’ve been in good standing with the IRS and make a one-time mistake, you may be eligible to have penalties waived.
However, the program is limited in scope—and many taxpayers either don’t qualify or aren’t aware it exists.
The AICPA is urging the Internal Revenue Service (IRS) to expand and modernize the FTA program in several important ways:
- Currently, FTA applies to only a narrow set of penalties. The proposal recommends expanding eligibility to include additional penalties, such as those related to information returns and other compliance requirements.
- One particularly notable recommendation would allow taxpayers to preserve their one-time abatement. If the IRS automatically applies FTA, taxpayers could instead opt to use a “reasonable cause” argument—saving their FTA for a future situation where it may be more valuable.
- The proposal also suggests allowing penalty relief across multiple tax periods when the issue stems from a single underlying problem. This could be especially helpful for businesses dealing with recurring filing or payment issues tied to one event.
- Finally, the AICPA is encouraging the IRS to make FTA more accessible by expanding automatic relief and improving taxpayer awareness. Many individuals miss out on penalty relief simply because they don’t know it’s available.
If adopted, these changes could significantly reduce the financial strain caused by IRS penalties and make relief more accessible to taxpayers who are otherwise compliant.
More importantly, it reflects a broader recognition that not all tax mistakes are equal—and that taxpayers who make a genuine, one-time error deserve a fair opportunity to correct it without excessive penalties.
Even under the current rules, many taxpayers qualify for penalty relief—but navigating the process can be complex. Determining whether you qualify for First-Time Abatement or other relief options, such as reasonable cause, often requires a detailed understanding of IRS procedures.
At Bryson Law Firm, we help individuals and businesses evaluate their options and pursue the most effective strategy for reducing or eliminating IRS penalties.
If you owe IRS penalties, you may have more options than you realize. Contact Bryson Law Firm today to explore your eligibility for a penalty abatement and take the first step toward resolving your tax burden.
