The Treasury Inspector General for Tax Administration yesterday released Penalty Abatement Procedures Should Be Applied Consistently to All Taxpayers and Should Encourage Voluntary Compliance (2012-40-113):

The Internal Revenue Code imposes a Failure to File (FTF) penalty
for failing to file a tax return and a Failure to Pay (FTP) penalty for failing
to pay the tax shown on any tax return by the date prescribed.  The IRS can
abate both penalties under certain circumstances.  If the IRS does not administer these and
other penalties fairly and accurately, taxpayers’ confidence in the tax system
will be jeopardized. 

The IRS waives FTF and FTP penalties for some taxpayers who have demonstrated full compliance over the prior three years. The purpose for granting the waiver, called a First-Time Abate (FTA), is to reward past tax compliance and promote future tax compliance. However, most taxpayers with compliant tax histories are not offered and do not receive the FTA waiver.
TIGTA estimated that for Tax Year 2010, approximately 250,000 taxpayers with FTF penalties and 1.2 million taxpayers with FTP penalties did not receive penalty relief even though they qualified under FTA waiver criteria. TIGTA estimated the unabated penalties totaled more than $181 million.