The qualifications
- You have no significant penalties assessed in the three tax years preceding the one you’re abating.
- You have filed (or filed an extension for) all required returns.
- You have paid, or arranged to pay, any tax due.
For a non-US founder in their LLC’s first year of operation, all three conditions are trivially met — there’s no prior filing history, so there’s nothing to be non-compliant about.
Which penalties FTA covers
- Failure-to-file penalties
- Failure-to-pay penalties
- Failure-to-deposit penalties
For Form 5472 specifically, FTA addresses the §6038A(d) failure-to-file penalty.
FTA vs reasonable cause
- FTA is administrative, no narrative required beyond the compliance history. Fast.
- Reasonable cause is a facts-and-circumstances test with a written memo. Takes more work.
Strategy: use FTA for the first year of a multi-year catch-up filing, use reasonable cause for the subsequent years. Both can run in parallel in a single abatement request.
How to request FTA
A single sentence in the abatement memo: “The taxpayer requests First-Time Abatement under IRM 20.1.1.3.3.2.1 for tax year YYYY.” No further argument needed — the IRS checks the compliance history and either grants or denies.
See also: Reasonable cause, Form 5472.