IRS penalty abatement: how to get tax penalties removed

The most commonly abated penalties are failure to file (5% of the unpaid tax per month, up to 25%), failure to pay (0.5% per month, up to 25%), and failure to deposit for employment taxes. Some penalties — like accuracy-related penalties or the estimated tax penalty — have different rules, and the estimated tax penalty generally can't be removed through First Time Abate. Penalties can make up a large share of an older balance, so relief can matter as much as the payment plan you choose. Our penalty calculator shows how they build up.

First Time Abate (FTA) is an administrative waiver. You may qualify if, for the 3 tax years before the year you want relief, you had no significant penalties (or any you had were removed for a reason other than FTA); you've filed all currently required returns or valid extensions; and you've paid, or arranged to pay, the tax due. FTA usually applies to one tax period — typically the earliest year with penalties. You don't need to explain why you were late. See first-time penalty abatement.

Reasonable cause relief applies when you exercised ordinary business care and prudence but still couldn't comply. Accepted reasons often include fire, casualty or natural disaster; serious illness or death in the immediate family; inability to obtain records; and other circumstances beyond your control. Not knowing the rules or lacking money generally isn't enough on its own. You'll need to explain what happened, when, how it prevented compliance, and how you complied once you could. See reasonable cause penalty relief.

Statutory exception: if you relied on incorrect written advice from the IRS, you may get relief for penalties caused by that advice. Disaster relief: the IRS often postpones deadlines in federally declared disaster areas, which can prevent penalties from applying. Penalty relief during a payment plan: the failure-to-pay rate drops to 0.25% a month while an installment agreement is in effect for a timely filed return — not abatement, but it reduces the growth.

Interest that accrued on the abated penalty is removed with it. Interest on the underlying tax, however, is generally required by law and can't be waived for reasonable cause — it can be reduced only in narrow cases, such as unreasonable IRS errors or delays. That's why the earlier you resolve the tax itself, the less you pay overall.

1. Check your transcript to see which penalties were assessed and when.
2. Decide on FTA or reasonable cause. If you qualify for FTA, it's usually simplest.
3. Call the number on your notice — many FTA requests are granted by phone — or respond in writing.
4. Use Form 843 (Claim for Refund and Request for Abatement) for written requests when needed.
5. Include supporting documents for reasonable cause, such as hospital records or insurance claims.
6. Appeal a denial: you can request Appeals review if the IRS rejects your request.

Say you filed four months late and paid five months late on a $10,000 balance. The failure-to-file penalty would be about $2,000 (5% × 4 months, reduced by the overlapping failure-to-pay amount for those months), and the failure-to-pay penalty adds roughly $250 more. If you qualify for First Time Abate, both can be removed along with the interest charged on them — a saving of more than $2,000 before you even set up a payment plan. Interest on the original $10,000 stays. Exact figures depend on dates and partial payments, so check your transcript or use our penalty calculator. Because FTA usually covers just one year, practitioners often apply it to the earliest year with penalties and use reasonable cause for later years if the facts support it. If you have penalties in several years, ask the IRS which year FTA will be applied to before you agree, so you get the most value from it.