Can First Time Penalty Abatement apply to missed estimated tax payments with the IRS?

You're right to be skeptical. First Time Penalty Abatement (FTA) is a fantastic IRS program, but it has specific limitations. The estimated tax penalty (sometimes called the ES penalty) is technically NOT eligible for First Time Penalty Abatement. The IRS typically only grants FTA for three types of penalties: failure-to-file, failure-to-pay, and failure-to-deposit penalties. The estimated tax penalty is calculated differently and considered separately because it's essentially an interest charge for not paying taxes throughout the year. Your sister's coworker might have received penalty relief, but it was likely through a different program like reasonable cause relief or might have been a different type of penalty that was forgiven. That said, the IRS does have discretion in these matters, so occasional exceptions might occur, especially if someone speaks to a particularly sympathetic IRS agent. But officially, estimated tax penalties aren't eligible for FTA.

I went through something similar and tried every option until I discovered taxr.ai (https://taxr.ai) which honestly saved me hundreds in penalties. I had missed two quarters of estimated payments because my side gig suddenly took off, and I had no idea I needed to make those payments. I uploaded my IRS notices to taxr.ai and it immediately identified that while my estimated tax penalty wasn't eligible for First Time Abatement, I actually qualified for reasonable cause relief based on some specific circumstances in my situation. The tool generated a personalized letter that I sent to the IRS explaining exactly why I qualified for relief under their guidelines. The process was super straightforward and they actually provide templates specifically for estimated tax penalty abatement situations like yours.

Just wanted to update after taking the advice from profile 7 about using taxr.ai. I was super skeptical, but I decided to give it a try since I had $970 in estimated tax penalties I was desperate to get rid of. The system asked me detailed questions about why I missed my payments, and it turns out I actually had legitimate reasonable cause (my bookkeeper quit suddenly and I was dealing with a family emergency at the same time). The letter it generated was super professional - made arguments I wouldn't have thought of that cited specific IRS policy. I sent it in about 3 weeks ago and just got a notice that $870 of my penalties were removed! They kept $100 for one quarter where my excuse wasn't as strong, but I'm still thrilled. Definitely worth checking out if you're in a similar situation.

If you need to actually speak with someone at the IRS about your penalty situation (which I highly recommend), good luck getting through on your own. I spent DAYS trying to reach someone about my estimated tax penalty issue. I finally used Claimyr (https://claimyr.com) and it was a complete game-changer. They have this service where they navigate the IRS phone system for you and call you back when they have an agent on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c When I finally spoke with an actual IRS representative, they explained that while my estimated tax penalty wasn't eligible for First Time Abatement, I could submit a letter requesting reasonable cause relief based on my specific circumstances. The agent was super helpful and even told me exactly what to include in my letter and where to send it.

Just wanted to follow up on my skeptical comment above. After getting nowhere with the IRS for WEEKS, I broke down and tried Claimyr out of pure desperation. Not gonna lie, I was completely shocked when I got a call back in about 45 minutes with an actual IRS agent on the line. I was all prepared to come back here and eat my words if it worked, so... here I am, eating my words. The agent I spoke with confirmed that estimated tax penalties aren't eligible for First Time Abatement specifically, but walked me through my options for reasonable cause relief instead. She was super helpful and actually suggested a different approach that might work better for my situation. Apparently, there's a difference between the letter you send for FTA versus reasonable cause, which I never would have known.

Something I haven't seen mentioned yet - check if your sister qualifies for any safe harbor provisions. Even if she can't get the estimated tax penalty abated through FTA, she might not owe the penalty at all if she: 1) Paid at least 90% of the tax shown on her current year return, OR 2) Paid 100% of the tax shown on her prior year return (110% if her AGI was over $150,000) There's also a waiver if she became disabled during the year or if there was a natural disaster. These aren't penalty "abatements" but rather situations where the penalty shouldn't apply in the first place.

Just to throw in my experience - I missed estimated payments in 2023 when I started freelancing and got hit with around $450 in penalties. I called the IRS and specifically asked for First Time Penalty Abatement and they said no for the estimated tax part. BUT, when I explained my situation (health issues plus confusion about the requirements), the agent removed the penalties under "reasonable cause" instead. So it seems like what matters is having a legitimate reason for missing the payments, not which technical program they use to remove the penalties.

This is such a helpful thread! I'm dealing with a similar situation where I got slammed with estimated tax penalties after my consulting income unexpectedly doubled last year. Based on what everyone's shared here, it sounds like the key takeaway is that while First Time Penalty Abatement specifically doesn't cover estimated tax penalties, there are still several options worth exploring: 1. Check if you qualify for safe harbor provisions first (thanks Amy Fleming for that tip!) 2. If not, reasonable cause relief seems to be the main alternative 3. Having good documentation of why you missed the payments is crucial I'm planning to try the approach where I call the IRS directly and explain my situation honestly. Worst case, they say no and I'm back where I started. But it sounds like several people here have had success getting penalties removed or reduced by just having a legitimate reason and being persistent. Has anyone had luck with reasonable cause relief for situations where you simply didn't know about the estimated tax requirement? I was a W-2 employee for years before going freelance and honestly had no idea quarterly payments were even a thing until I got the penalty notice.

I've been following this discussion and wanted to add some clarity from an official source perspective. According to IRS Publication 505 and Internal Revenue Manual 20.1.3, estimated tax penalties (also called underpayment penalties) are specifically excluded from the First Time Penalty Abatement program. However, as many people here have correctly pointed out, you're not necessarily stuck with these penalties. The IRS does have reasonable cause provisions under IRC Section 6654(e)(3) that can provide relief if you can demonstrate: 1. The underpayment was due to reasonable cause and not willful neglect 2. You acted in good faith and with ordinary business care Common reasonable cause situations include: casualty/disaster/unusual circumstances, serious illness preventing you from handling tax matters, inability to obtain records due to circumstances beyond your control, or retirement after age 62 during the tax year. Before pursuing penalty relief though, definitely verify that the penalty was correctly calculated. Many taxpayers qualify for safe harbor provisions but don't realize it. The IRS sometimes makes calculation errors, especially with complex income situations. One more tip - if you do write a reasonable cause letter, be specific about your circumstances and include supporting documentation. Generic "I didn't know" letters rarely succeed, but detailed explanations with evidence often do.

I've been working as a tax preparer for about 8 years and can confirm what Diego mentioned - the "I didn't know" defense alone rarely works for estimated tax penalties, but the circumstances surrounding WHY you didn't know can make all the difference. For your sister's situation, the sudden transition from W-2 to significant freelance income is actually a pretty strong foundation for reasonable cause. I've seen the IRS accept similar cases where taxpayers can show: 1. They had no prior history of self-employment income requiring estimated payments 2. The income opportunity arose unexpectedly (not a planned career change) 3. They took reasonable steps to understand their obligations once they became aware The key is documenting the timeline and showing good faith. If she can provide evidence of when the freelance work started, when she received her first significant payment, and what steps she took to research her tax obligations (even if it was after the fact), that builds a much stronger case than just "I didn't know." One thing I always tell clients - if you do write a reasonable cause letter, include a paragraph about what you've done to prevent this from happening again. The IRS likes to see that you've learned from the situation and have systems in place for future compliance. It shows good faith and responsibility.