As April 15th rolls around, most CPAs with high net worth taxpayers file automatic extension requests (Form 4868) on behalf of those taxpayers. While the IRS’s electronic filing program has made filing these extensions as easy as pushing a button, sometimes those extensions get lost. When that happens, the taxpayer can be on the hook for failure to file penalties – up to 25% of the taxes owed. Surprisingly, in these situations, the taxpayer is not entitled to an abatement of the penalties, even though s/he relied on his or her accountant to file the extension using the appropriate tax software. While this result seems to fly in the face of the plain language of the applicable Treasury Regulations, a 1985 Supreme Court decision (U.S. v. Boyle) has made it very difficult for taxpayers to avoid penalties when relying on their accountants to file (electronically or otherwise) necessary tax forms. Under the Internal Revenue Code, failure to file penalties will not be imposed if the late filing is due to “reasonable cause.” A taxpayer has reasonable cause for failing to timely file a return if “the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time.” It is due to the 1985 Supreme Court Boyle ruling which established that the filing of returns is a “non-delegable” duty, thus a taxpayer does not have “reasonable cause” for the late-filing of a return if the taxpayer relied on an accountant to file the return and the accountant failed to do so in a timely manner. 469 U.S. 241 (1985). In 1997, the Second Circuit extended the bright-line rule to the filing of automatic extension requests. McMahan v. Comm’r, 114 F. 3d 336, 369-370 (2d. Cir. 1997). The McMahan court ruled that a taxpayer does not exercise ordinary business care and prudence in relying on his CPA to file extensions. Despite the cloud Boyle casts over the use of the reasonable cause defense for a failure to file penalty, a little known “silver lining” exists that taxpayers (and their CPAs) can use to avoid failure to file or failure to pay penalties. The silver lining to the Boyle cloud is the IRS’s poorly publicized First Time Abatement Program. The First Time Abatement program (“FTA”) allows taxpayers to obtain an administrative waiver of failure to file or failure to pay penalties if the taxpayer has a clean compliance history. Many taxpayers and practitioners are unaware of this program; therefore these administrative waivers are issued far less often than they are otherwise available. A taxpayer qualifies for the FTA if s/he is currently compliant with all payment and filing requirements and has a clean penalty history for the three prior years. Taxpayers can seek a waiver under the FTA while also requesting abatement based on the reasonable cause exception. Requests for an FTA waiver of penalty can be made over the phone or through a written request to the IRS (and in some instances, the IRS may require a written submission). If the taxpayer is under audit, the request must be made directly through the compliance function. In any event, a taxpayer who seeks abatement under the FTA program will not be able to obtain this administrative waiver in future years, thus it is always preferable to obtain abatement on reasonable cause grounds.