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Penalty Relief Router

By Forrest Baumhover, CFP®, EA · Last verified October 2, 2026

Answer once — get the AEP, First-Time Abate, or reasonable-cause determination this penalty routes to, with the IRM/IRC citation governing every branch it passed through, not just the final answer.

How this compares to FTD's Penalty Abatement Analyzer

This router adds a step-by-step trace that shows the citation for each branch, instead of a single results panel. The Penalty Abatement Analyzer (/penalty) ranks the reasonable-cause arguments and shows its gates and band. Both pages call the same calculation, so the eligibility tests match.

Choose Form 1040 or Form 1120 for any other return in that series. First-Time Abate does not reach Form 990 or Form 1099-series returns (IRM 20.1.1.3.3.2.1 ¶(8)); for a penalty under IRC §6721 or §6722, choose the information return penalty type. For Form CT-1, use the Penalty Abatement Letter Builder.

First-Time Abate eligibility

Was the same return type filed for each of the prior 3 years (or 12 consecutive quarters), or was no return required? First-Time Abate asks only whether the return was filed, so a late return that drew no penalty does not fail it (IRM 20.1.1.3.3.2.1 ¶(4)). AEP also required timely filing; if one of those returns was late, check the transcript for AEP. A year the IRS filed for the client (a substitute for return or an IRC 6020(b) return) does not count as filed for AEP (IRM Procedural Update sbse-20-0626-0643 ¶(13)).
Is the client free of any unreversed penalty in the prior 3 years (or 12 consecutive quarters)? Disregard an estimated tax penalty and one abated for reasonable cause or IRS error. Adjustments for 2019-2021 follow. A penalty the IRS removed under First-Time Abate, or under a "tolerance" rule (a small allowed deviation in dollars or time), still counts against this gate (Penalty Reason Codes 018, 020 or 021). A transcript may not show the reason; if it does not, ask the IRS which reason code it used. A prior AEP grant leaves no abatement to find; an unreversed TC 971 action code 996 shows AEP or a prior First-Time Abate grant. The IRM describes the 996 only for tax years 2022 and later on Forms 1040, 940, 941, 943, 944 and 945 (IRM 20.1.1.3.3.2.4), so a missing 996 proves nothing for other years or forms. First-Time Abate has two lookback adjustments. For lookback years 2019 and 2020: disregard a failure-to-file penalty assessed on or before September 30, 2022, and a First-Time Abate grant that covered only the failure-to-file penalty and that the IRS granted on or before that date. If First-Time Abate relieved both the failure-to-file and failure-to-pay penalties by that date, count it (IRM 20.1.1.3.3.2.2; Notice 2022-36). For tax years 2020 and 2021 on the account types the IRM names (business accounts MFT 02; individual accounts MFT 30 and 31): disregard a prior First-Time Abate grant that removed only the failure-to-pay penalty. Count the period as compliant if the IRS waived the whole failure-to-pay penalty under its 2020 and 2021 failure-to-pay relief and no other penalty shows except the estimated tax penalty (IRM 20.1.1.3.3.2.3).
Is the penalized return a joint return (filing status Married Filing Jointly)?
Is the tax for this period paid in full? It does not affect First-Time Abate eligibility. If unpaid, relief removes the failure-to-pay penalty to date, the penalty keeps growing until you pay, and you ask again after you pay in full (IRM 20.1.1.3.3.2.1 ¶(14)).

Reasonable cause factors

Select any that apply and add supporting facts.

Answer the First-Time Abate eligibility questions first: filing in the prior 3 years, penalties in the prior 3 years, tax paid in full, joint or separate return.

The decision this router makes

This page and the Penalty Abatement Analyzer (/penalty) both work from the IRM and the Procedural Update; nothing here is a second, competing determination. What this router adds is a visible branch-by-branch trace that shows the IRM or IRC citation behind each branch it passed through, instead of one results panel.

The trace asks up to nine questions: whether the return period is AEP-only with no FTA path (IRM Procedural Update sbse-20-0626-0643, IR-2026-83), whether FTA or AEP already resolved this period (checked against the same markers the engine already looks for), whether the period sits in the AEP/FTA transition band with the outcome unconfirmed, whether the filer sent a prior return late, whether the extra business-return or joint-return First-Time Abate conditions stay unchecked or fail, First-Time Abate's own three-year clean-compliance test (IRM 20.1.1.3.3.2.1), and — only if neither program applies — whether a recognized reasonable-cause factor exists in the facts given (IRM 20.1.1.3.2).

Eight outcomes are possible: AEP applies automatically, relief already applied (do not re-request the amount it resolved), the transition band is ambiguous and needs a transcript check, First-Time Abate is available to request, First-Time Abate stays unconfirmed until you check the extra answers, an AEP-only return where you check the account because First-Time Abate no longer exists, reasonable cause exists case-by-case, or the facts given identify no relief argument. Each terminal carries its own citation set — a "no argument identified" result still cites IRM 20.1.1.3.3.2.1, IRM 20.1.1.3.2, and IRC §7526, naming exactly which paths the trace checked and came up empty rather than a bare no.

Worked example: a 2025 failure-to-pay penalty with three years of clean filing history, no unabated prior penalty, and no sign that AEP already resolved it passes the AEP-only, already-resolved, transition-band, late-filing, extra-condition and FTA-eligibility checks and lands on First-Time Abate, request it.

Know your route and want the request in writing? Ask for relief with the Penalty Abatement Letter Builder, which drafts a First Time Abate or reasonable-cause letter from your own facts.

More from the Desk

Sources

Read the Deep Dive behind this tool: Deep Dive: Why You May Be Filing FTA Requests You No Longer Need

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