IRS Penalty Abatement

IRS penalties can add up fast — a failure-to-file penalty alone can reach 25% of the unpaid tax. Penalty abatement is the process of requesting the IRS remove or reduce these penalties. There are two primary pathways: First Time Abatement and Reasonable Cause. Each has specific criteria, and a licensed professional can assess which applies to your situation.

Common IRS Penalties That Can Be Abated

Failure to File (FTF): 5% of unpaid taxes per month, up to 25%
Failure to Pay (FTP): 0.5% of unpaid taxes per month, up to 25%
Failure to Deposit (FTD): 2–15% depending on how late a required deposit was
Accuracy-Related Penalty: 20% of the underpayment due to negligence or substantial understatement

Penalty abatement does not reduce the underlying tax debt or interest — only the penalties themselves. However, for some taxpayers, penalties make up a substantial portion of the total balance.

Two Primary Abatement Pathways

Most Accessible

First Time Abatement (FTA)

The IRS's administrative waiver for taxpayers with a clean compliance history. No documentation of hardship required — if you qualify, the IRS applies it.

To qualify, you generally must:

Have no penalties for the 3 prior tax years
Have filed all required returns or extensions
Have paid or arranged to pay any tax due

FTA is available for failure-to-file, failure-to-pay, and failure-to-deposit penalties. It applies to one tax year — additional years require Reasonable Cause.

Documentation Required

Reasonable Cause Abatement

For taxpayers who cannot use FTA, the IRS may remove penalties if you can demonstrate a reasonable cause for non-compliance despite ordinary business care and prudence.

Circumstances that may qualify:

Serious illness or death in the family
Natural disaster or casualty
Reliance on erroneous professional advice
Unavoidable absence
Inability to obtain records despite reasonable effort
Ignorance of the law in certain limited circumstances

Statute of Limitations on Penalty Abatement: You generally have 2 years from when you paid the penalty (or 3 years from when the return was due) to request abatement. Waiting too long can foreclose this option — a reason to act promptly.

🔗 IRS.gov — Penalty Relief 🔗 IRS First Time Abatement 🔗 IRS Reasonable Cause Relief

How to Request Penalty Abatement

By phone

For First Time Abatement, you or your licensed representative can often request FTA over the phone with the IRS directly. This is the fastest path for simple FTA cases.

By written request

For Reasonable Cause abatement, you or your representative submits a written request (or IRS Form 843) with documentation supporting your case. A licensed professional can draft this request to maximize the likelihood of approval.

Through IRS Appeals

If the IRS denies an abatement request, you have the right to appeal the decision through the IRS Independent Office of Appeals. A licensed professional can represent you through the appeals process.

Penalty Abatement as Part of a Larger Strategy

Penalty abatement is often most valuable when combined with other resolution strategies. For example, a taxpayer pursuing an installment agreement can simultaneously request penalty abatement to reduce the total balance being paid. A taxpayer with an OIC submission can have penalties as part of the settled amount. A licensed professional evaluates all options together.

Educational Disclaimer

General educational information only. Not tax advice. Penalty abatement eligibility depends on individual facts and IRS policy that changes over time. Consult a licensed Enrolled Agent, CPA, or tax attorney. Tax Allstars (Brokentoy LLC) does not provide tax advice or IRS representation.