IRS penalties can add 20–25% or more to what you already owe in unpaid taxes. Many taxpayers don't know that the IRS has formal programs to remove these penalties — programs that the IRS doesn't advertise but is required to apply when you qualify.
What Types of Penalties Can Be Abated?
The most commonly abated penalties are:
- Failure-to-File Penalty: 5% per month (up to 25%) for filing your return late
- Failure-to-Pay Penalty: 0.5% per month (up to 25%) for not paying on time
- Accuracy-Related Penalty: 20% of the underpayment for negligence or substantial understatement
- Estimated Tax Penalty: For not paying enough through withholding or quarterly payments
Note: Interest generally cannot be abated (it's required by law) — but reducing penalties also reduces the principal that interest is calculated on.
Method 1: First-Time Penalty Abatement (FTA)
The First-Time Abatement program is the most accessible form of penalty relief. You qualify if:
- You have a clean compliance history: No penalties for the 3 prior tax years (or you weren't required to file)
- You've filed all required returns: All current and prior year returns are filed (or filed with extensions)
- You've paid or arranged to pay your tax: You've paid the tax owed, or set up a payment plan
If you meet these criteria, the IRS must abate the penalties — it's not discretionary.
How to request FTA:
- By phone: Call the IRS at 1-800-829-1040 and specifically request First-Time Abatement. Have the tax year and notice number handy. This often works in a single call.
- By mail: Write a letter to the address on your notice requesting FTA, citing your clean compliance history.
- After paying: If you've already paid penalties, you can request a refund using Form 843 (Claim for Refund and Request for Abatement).
Important: FTA is only available once per "type" per year — if you already used FTA for a failure-to-file penalty, you can't use it again for the same year's failure-to-pay penalty. But you can use it for different years.
Method 2: Reasonable Cause Abatement
If you don't qualify for FTA (perhaps because you had a penalty in a prior year), you can still request abatement based on reasonable cause — circumstances beyond your control that prevented you from complying.
The IRS considers reasonable cause to include:
- Natural disaster or casualty: Fire, flood, storm that damaged records or prevented filing
- Death or serious illness: Your own or an immediate family member's
- Inability to obtain records: Records held by a third party you couldn't access
- Erroneous advice from the IRS: If you followed incorrect advice from an IRS employee
- Erroneous advice from a tax professional: If your CPA gave you wrong advice and you had a reasonable basis for relying on it
- Ignorance of the law: Sometimes accepted if you're a first-time filer or in genuinely novel situations
What is NOT reasonable cause:
- Forgetfulness
- Lack of money to pay (though this can support a different form of relief)
- Reliance on software that calculated incorrectly (you're responsible for the accuracy)
- Busy schedule
How to request reasonable cause abatement: Write a letter explaining:
- The specific reason you couldn't comply
- The dates of the events
- Documentation (hospital records, death certificates, insurance claims for casualty)
- What you did to comply as soon as the circumstances permitted
Be specific and factual. The IRS is looking for a genuine story, not a generic excuse.
Method 3: Administrative Waiver
Beyond FTA, the IRS can grant abatement through administrative waivers when there's been:
- A systemic IRS processing error
- An error in an IRS publication or announcement that you reasonably relied on
- A new IRS policy applied retroactively
These are rarer and typically require IRS initiative or an appeals process.
When to Request: Before or After Paying?
You can request penalty abatement:
- Before paying: In a letter or by phone when you receive the penalty notice
- After paying: Using Form 843 (within 3 years of filing or 2 years of payment, whichever is later)
If you're setting up an installment agreement, you can often request FTA simultaneously, and the IRS will apply the abatement before finalizing your agreement balance.
What to Do If Your Request Is Denied
If the IRS denies your abatement request:
- Request a copy of the denial in writing (if you requested by phone)
- Appeal the decision to the IRS Independent Office of Appeals
- For penalties above a threshold, you can petition Tax Court after receiving a Statutory Notice of Deficiency
Many denials are overturned on appeal, particularly for reasonable cause claims where the initial reviewer didn't have all the facts.
Got a penalty notice from the IRS that you want to understand and potentially fight? PaperLens reads any IRS notice and explains exactly what you owe, why, and whether you qualify for abatement. Scan your notice →