AICPA pushes IRS to ease and expand first‑time abatement rules

The IRS should expand the first-time abatement (FTA) program to cover more types of tax and information-return penalties and allow taxpayers to reverse an automatically applied FTA when they demonstrate reasonable cause, the AICPA said in a letter.

The AICPA seeks the reversal so that taxpayers “can save their one-time abatement for a future need,” a news release said.

“Our recommendations would alleviate significant tax administrative burdens on the IRS, increase taxpayer awareness of the availability of FTA relief, and promote voluntary taxpayer compliance,” Daniel Hauffe, AICPA senior manager–Tax Policy & Advocacy, said in the March 6 release. “Ultimately, expanding application of the FTA program and simplifying the procedures reduce unnecessary complexity and reinforce the fairness of penalty administration.”

The AICPA’s letter recommends the IRS take the following actions:

• Expand FTA to Sec. 6652 penalties and corresponding annual filings.
• Provide FTA relief for information-return penalties.
• Expand FTA to filings related to estate and gift tax that can recur more than once.
• Allow FTA relief for the Sec. 6656 penalty even in cases where the Electronic Federal Tax Payment System is required but not used.
• Automatic application of FTA relief and review of reasonable-cause statements.
• Promote taxpayer awareness of FTA availability.
• Make FTA relief available for multiple periods if the failure stems from a single overall error.

News of the move to automatic FTAs came last year at the AICPA National Tax Conference, where National Taxpayer Advocate Erin Collins announced the change. She said about 1 million mostly lower-income taxpayers would receive the penalty relief in 2026.

The IRS now offers FTAs to taxpayers who file their return late, provided they meet certain criteria, Collins said. Those criteria include having no unreversed penalties in the preceding three tax years except estimated tax penalties.

Previously, the information about FTAs was only in the Internal Revenue Manual (IRM), which contains internal guidelines for IRS personnel to follow. They were neither statutory nor regulatory, so a taxpayer, CPA, or attorney calling the IRS on a client’s behalf had to know they’re in the IRM.

The IRS had agreed several years ago to make FTAs automatic but had to determine a way to track taxpayers’ history through its system, Collins said.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.