IRS Penalty Abatement
IRS penalties can add thousands to your tax debt. We help taxpayers reduce or eliminate penalties through legitimate abatement programs.
Get Help With IRS Penalties
Understanding IRS Penalties
The IRS assesses penalties for various tax violations, and they can quickly add up to a significant portion of your total debt. Common penalties include:
Failure-to-File Penalty
5% of unpaid taxes per month, up to 25%
Assessed when you don't file your return by the due date
Failure-to-Pay Penalty
0.5% of unpaid taxes per month, up to 25%
Assessed when you don't pay the tax shown on your return
Accuracy Penalty
20% of the underpayment
Assessed for negligence or substantial understatement of tax
Estimated Tax Penalty
Interest-based calculation
Assessed when you don't pay enough estimated tax
Example: A taxpayer who owes $50,000 and didn't file or pay for 5 months could face over $15,000 in penalties alone — that's 30% added to the original debt.
Ways to Get Penalties Reduced
The IRS has several programs that can reduce or eliminate penalties. Here are the main options:
First-Time Penalty Abatement
If you have a clean compliance history for the past 3 years, you may qualify for automatic penalty removal — no questions asked.
Eligibility: No penalties in prior 3 years, all returns filed, paid or arranged to pay all tax due
Reasonable Cause
If you have a legitimate reason for failing to file or pay on time, the IRS may remove penalties. Valid reasons include serious illness, natural disasters, or death in the family.
Requires: Documentation of circumstances that prevented compliance
Statutory Exception
Certain situations automatically excuse penalties, such as being in a federally declared disaster area or receiving incorrect written advice from the IRS.
Examples: Disaster relief, erroneous IRS advice, military service
Our Penalty Abatement Process
- 1
Penalty Analysis
We review your account to identify all penalties and determine which abatement options apply.
- 2
Documentation Gathering
We help you compile evidence to support your abatement request.
- 3
Request Submission
We submit a formal penalty abatement request with supporting documentation.
- 4
Follow-Up & Appeals
If initially denied, we can appeal or pursue alternative relief options.
Frequently Asked Questions
What exactly is penalty abatement?
Penalty abatement is the IRS process for reducing or eliminating penalties that have been assessed on your tax account. The IRS adds penalties for a variety of reasons — failing to file on time, failing to pay on time, underpaying estimated taxes, and more. These penalties can add up to tens of thousands of dollars on top of the original tax you owe. Through abatement programs like First-Time Penalty Abatement and Reasonable Cause, we can request that the IRS remove these penalties from your account, potentially saving you a significant amount of money.
What do I need to successfully get penalties removed?
It depends on the type of abatement. For First-Time Penalty Abatement, you need a clean compliance history for the prior three years — meaning no penalties were assessed, all required returns were filed, and any taxes due were paid or arranged. For Reasonable Cause abatement, you need documentation showing circumstances beyond your control prevented you from complying — such as medical records for serious illness, death certificates, natural disaster documentation, or evidence of reliance on incorrect professional advice. We help clients identify which type of abatement they qualify for and compile the strongest possible case.
How many penalties can be removed at once?
First-Time Penalty Abatement typically removes penalties for a single tax period. However, Reasonable Cause abatement can be applied to multiple tax years if the same circumstance affected your ability to comply across those years. For example, a prolonged illness that spanned two or three tax years could justify penalty removal for all affected periods. We review your entire account to identify every penalty that may be eligible for removal, maximizing the total amount abated.
Can I get penalties removed if I already paid them?
Yes. If you've already paid penalties and they're subsequently abated, the IRS will issue a refund or apply the credit to any remaining balance on your account. Many taxpayers don't realize they were eligible for abatement until after they've already paid. There is generally a two-year window from the date of payment to request a refund of penalties paid, though some exceptions apply. It's worth having your account reviewed even if you've already paid — you may be entitled to money back.
What's the difference between penalties and interest?
Penalties are charges the IRS imposes as a consequence for not complying with tax laws — they're essentially fines. Interest, on the other hand, is the cost of borrowing money from the government and accrues automatically on any unpaid balance. While penalties can often be abated through the programs described above, interest is much harder to remove and is only abated in very limited circumstances (such as IRS processing delays). However, when penalties are removed, the interest that was charged on those penalties is also removed, providing additional savings.
What if the IRS denies my penalty abatement request?
A denial isn't necessarily the end of the road. You can appeal the decision through the IRS Independent Office of Appeals, which provides a fresh review by a different, often more senior, IRS employee. Appeals Officers have broader authority to settle cases and are generally more willing to consider your circumstances. We've had many penalty abatement requests initially denied at the collection level that were subsequently approved on appeal. If you've been denied before, it may be worth having a professional review your case.
Can state tax penalties be abated too?
Most state tax authorities have their own penalty abatement programs, though they vary significantly from state to state. Some states mirror the IRS's First-Time Penalty Abatement program, while others have more restrictive criteria. States like California, New York, and Colorado each have unique processes for requesting penalty relief. We're experienced in negotiating penalty abatement with state tax authorities nationwide and can handle both your federal and state penalty issues simultaneously.
Related Tax Relief Services
Penalty abatement is often part of a broader resolution strategy. These services may also apply:
IRS Payment Plans
After reducing your balance through penalty abatement, set up an affordable monthly payment plan for the remaining tax debt.
Unfiled Tax Returns
Unfiled returns generate the largest penalties. Filing delinquent returns is the first step toward getting those penalties abated.
Offer in Compromise
If your total debt — even after penalty abatement — is more than you can pay, an OIC may let you settle for less.
Don't Pay More Than You Have To
IRS penalties are often negotiable. Let us help you reduce or eliminate them.