Penalty Abatement

Penalty abatement is the removal or reduction of IRS penalties when a taxpayer can demonstrate reasonable cause or qualifies for administrative relief. This can significantly reduce your total tax debt.

Types of Penalty Abatement

First-Time Penalty Abatement (FTA)

Available to taxpayers with a clean compliance history for the prior three years

Reasonable Cause

When circumstances beyond your control prevented compliance

Administrative Waiver

For specific situations defined by IRS policy

Statutory Exception

When the law provides specific relief

Common Penalties That Can Be Abated

• Failure to File: For not filing tax returns on time
• Failure to Pay: For not paying taxes by the due date
• Failure to Deposit: For businesses not making required tax deposits
• Accuracy-Related: For substantial understatement of tax

Reasonable Cause Criteria

The IRS considers reasonable cause when:

• Death, serious illness, or unavoidable absence
• Fire, casualty, natural disaster, or other disturbances
• Unable to obtain records
• Mistake was made despite ordinary business care
• Reliance on incorrect written advice from the IRS

First-Time Penalty Abatement Requirements

To qualify for FTA, you must:

• Have no penalties for the three tax years prior to the tax year of the penalty
• Be current with filing requirements
• Have paid or arranged to pay any tax due

How to Request Penalty Abatement

By Phone

Call the IRS and request penalty abatement (works best for FTA)

Written Request

Submit Form 843 (Claim for Refund and Request for Abatement) with supporting documentation

Professional Assistance

Tax relief professionals can prepare compelling abatement requests and handle IRS communications

Documentation Required

• Explanation of circumstances
• Supporting documents (medical records, insurance claims, etc.)
• Timeline of events
• Evidence of ordinary business care

Success Tips

• Be specific about the reasonable cause
• Provide detailed documentation
• Show the circumstances were beyond your control
• Demonstrate you acted responsibly once the situation was resolved

Potential Savings

Penalty abatement can save thousands of dollars:

• Failure to file penalty: Up to 25% of unpaid taxes
• Failure to pay penalty: Up to 25% of unpaid taxes
• Combined penalties can exceed 50% of the original tax debt

Professional Help

While you can request penalty abatement yourself, professional tax help significantly improves success rates. Tax professionals understand IRS procedures and can present your case most effectively.

If you're unsure about penalties on your account, verify tax relief options to understand what penalties might be eligible for abatement.