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Penalty Abatement Letter Builder

By Forrest Baumhover, CFP®, EA · Last verified September 29, 2026

Answer a few questions about one IRS penalty and get a draft letter that asks the IRS to remove it, under First Time Abate or reasonable cause. The tool shows which route fits and marks each test the Internal Revenue Manual (IRM) sets as met, not met, or unknown. The letter states only the facts you type in. If you already paid the penalty, or check the box for it, the tool also maps Form 843 line by line and turns the letter’s text into the form’s attached statement.

The output is a draft for you to review and sign. It is not legal or tax advice, and the IRS decides whether to remove the penalty.

The tool never asks for your name, address, or Social Security number. The letter leaves bracketed spaces for them, and you fill them in by hand after you print or paste it. FTD's code keeps what you type in your browser. A third-party script on the page, such as Grow by Mediavine, can also read what the page shows, and FTD's code cannot limit what it reads.

Step 1 of 4: The penalty

Pick the return the penalty sits on. Your notice names it.

The tax year the return covers, such as 2024 for a return due in April 2025.

The date the return was due before any extension, such as April 15. The tool checks it against the tax year and compares it with the dates of your reason.

Penalty

Check each penalty on your notice. The amount fields are optional; the letter repeats whatever you enter. For Forms 1065 and 1120-S, the failure-to-file choice means a late return, not the penalty for an incomplete one.

Choose this instead if your penalty is not one of the three above. The tool tells you why it does not draft for that penalty and where to go.

The notice or letter number in the top or bottom corner, such as CP14 or CP162. Optional.

The date on the notice. Optional.

Check this if you already paid the penalty. The letter then asks for a refund of whatever the IRS removes, and the tool builds a Form 843 worksheet, the IRS form for a penalty refund claim.

Optional. The letter works on its own, and the IRS also accepts Form 843. Check this to get the form line by line, with the letter as the attached explanation.

Step 2 of 4: Your filing history
Did you file this same return on time for the prior three years (or 12 quarters)?

Look at the three tax years before this one (or the 12 quarters before, for Form 941). Answer "yes, on time" if you filed this same return on time for each of them or had no requirement to file. For a joint return, both spouses need this history.

Apart from an estimated tax penalty, or one the IRS removed for reasonable cause or its own error, were those years or quarters free of penalties?

The test covers every penalty on that return type, not only the one on your notice. Your IRS online account or an account transcript shows this.

Did the IRS remove a penalty on those years or quarters under First Time Abate or a tolerance waiver?

A removal under First Time Abate or a tolerance waiver counts against you, because the waiver works once per clean history. A removal for reasonable cause or an IRS error does not count.

Step 3 of 4: Where things stand now
Have you now filed, paid, or deposited?

Have you now done the thing the penalty is about: filed the return, paid the tax, or made the deposit? Choose "partly" if you did some of it, such as filing without paying in full.

Step 4 of 4: Your reason (reasonable cause)

Add your reason if First Time Abate does not fit, or as a fallback in case the IRS finds your history does not qualify. The IRS considers First Time Abate first.

What this tool does not cover

  • Accuracy-related penalties (IRC §6662). Their reasonable-cause test runs under IRC §6664(c), and First Time Abate does not reach them. The Penalty Abatement Analyzer ranks arguments for them.
  • The estimated tax penalty (IRC §6654, §6655). The IRS says reasonable cause does not apply to it; for individuals, IRC §6654(e)(3) has separate waivers for casualty, disaster, or other unusual circumstances, and for someone who retired at 62 or older or became disabled.
  • Information return penalties (IRC §6721, §6722), which follow their own reasonable-cause test in Treas. Reg. §301.6724-1.
  • Fraud penalties (IRC §6651(f), §6663).
  • Returns other than the eleven the form lists. The IRM names returns First Time Abate does not reach, including Forms 706, 709, and 990 (IRM 20.1.1.3.3.2.1 ¶(8)).
  • Statutory exceptions the IRS considers before any waiver, such as the first-time depositor waiver for employment tax deposits (IRC §6656(c)). If one fits, raise it with the IRS directly.
  • Interest abatement for IRS delay (IRC §6404(e)). The letter asks only for penalty relief; the IRS removes interest on a removed penalty without a separate request.
  • Form 843 for anything other than these three penalties, such as interest abatement, the Trust Fund Recovery Penalty, or a refund of tax. The worksheet covers one tax period; file a separate Form 843 for each period.
  • Amended returns. The Form 843 instructions send changes to amounts reported on a return to that return’s amended form, such as Form 1040-X, 1120-X, or 941-X. A penalty request changes nothing on the return, so the tool builds none of them.

How the tool reads the rules

  • IRM 20.1.1.3.3.2.1 ¶(4) asks whether you "filed" the same return for the prior three years; IRS.gov says "timely filed." A "yes, on time" answer meets both, so the letter states it. A return you filed late may still pass the IRM wording, so for that answer the letter asks the IRS to check your account. For Forms 1120 and 1120-S, the IRM itself fails a return filed late in the look-back period (¶(6)).
  • IRS.gov lists no test about paying or arranging to pay among the First Time Abate tests, and IRM 20.1.1.3.3.2.1 ¶(14) tells IRS employees to grant the waiver on an unpaid balance and let the failure-to-pay penalty keep running. The tool does not ask about your current balance.
  • Which waiver applies turns on the tax period. IRS.gov lists First Time Abate for 2025 tax-year and 2026 quarterly returns that did not receive the Automatic Exemption from Penalty (AEP), and AEP for later periods. IRM Procedural Update SBSE-20-0626-0643 ¶(3) states the cutoff by due date: First Time Abate is no longer available for eligible returns with original due dates on or after January 1, 2027. A fourth-quarter 2026 Form 941 is due February 1, 2027, so the tool treats it as an AEP return, as the Analyzer does, and does not draft a First Time Abate request for it. The IRS.gov table and the update differ on this one return, and the tool follows the update, because the update states the date rule. Check your account for AEP instead. Form 1041 is not an AEP return, and the update ends First Time Abate only for AEP returns, so Form 1041 keeps it.
  • Where one of your history answers says "not sure," the letter asks the IRS to review your account for First Time Abate rather than stating the history as fact. IRS.gov says the IRS reviews your account for the waiver whether or not you name it.
  • For the failure-to-file and failure-to-pay penalties under IRC §6651, Treas. Reg. §301.6651-1(c)(1) asks for a written reasonable-cause statement with a declaration under penalties of perjury, so every reasonable-cause letter ends with one.
  • For a penalty you already paid, the tool builds Form 843. The Form 843 instructions list penalty refunds among the form’s purposes, and IRM 20.1.1 counts a claim on the form as a formal claim and a signed letter as an informal one. Treas. Reg. §301.6402-2(c) sends refund claims "not otherwise provided for" to Form 843, and §301.6402-3 sends income tax claims to the amended return; neither says outright which one reaches a paid penalty on an income tax return, so the tool relies on the instructions and does not call the form required.
  • The refund window follows IRC §6511(a) and (b)(2). For each payment, the last day is the later of three years from filing and two years from the payment. A return filed early counts as filed on its due date (IRC §6513(a)). When three years from filing ends on a weekend or legal holiday, the last day moves to the next business day (IRC §7503; Rev. Rul. 66-118, as Rev. Rul. 2003-41 describes it); the tool moves no other date, the narrower reading. A mailed claim counts as filed on its postmark date (IRC §7502).

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Sources

Read The Federal Tax Desk: every Deep Dive and Cheat Sheet, with primary-source citations →

This page provides general information about IRS procedures. It is not personalized tax advice, and reading it does not create a practitioner-client relationship with Forrest Baumhover, Fbaum Enterprises LLC, or The Federal Tax Desk. Every situation is different — if real money or a real deadline is on the line, consider having a licensed CPA, EA, or tax attorney review your specific facts before you act.

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