IRS penalties can significantly increase your tax debt—sometimes doubling or tripling what you owe. But these penalties aren't always final. Penalty abatement allows taxpayers to request removal of penalties under certain circumstances. Understanding when and how to request abatement can save substantial money.

Common IRS Penalties

The IRS imposes penalties for various tax violations. Failure-to-file penalties apply when you don't submit returns by the deadline—up to 25% of unpaid tax. Failure-to-pay penalties apply when you file but don't pay—0.5% per month up to 25%. Accuracy penalties apply to underpayments due to negligence or substantial understatement—typically 20% of the underpayment.

Penalties compound quickly. Combined with interest (which cannot be abated), a $10,000 tax debt can grow to $20,000 or more.

Reasonable Cause Abatement

The most common path to penalty removal is reasonable cause. This applies when you exercised ordinary business care but couldn't comply due to circumstances beyond your control. You must show you made a genuine effort to meet your obligations.

Common reasonable cause grounds include death or serious illness of the taxpayer or immediate family, unavoidable absence (military deployment, incarceration), fire, natural disaster, or other casualty destroying records, inability to obtain records despite reasonable efforts, and reliance on erroneous IRS advice or a competent tax professional.

Document everything. Medical records, death certificates, disaster declarations, and correspondence with tax professionals all support reasonable cause claims.

First-Time Penalty Abatement

The IRS offers first-time penalty abatement (FTA) for taxpayers with generally clean compliance histories. If you've filed and paid on time for the three years before the penalty, you may qualify regardless of why you failed this time.

FTA is administrative relief—you don't need to prove reasonable cause. You simply need a clean three-year history with no significant penalties assessed.

FTA only removes penalties for one tax year. Use it strategically—if you have penalties for multiple years, request FTA for the largest penalty.

Statutory Exceptions

Some penalties have built-in statutory exceptions. Estimated tax penalties may be waived for unusual circumstances like retirement or disability during the year. Reasonable cause exceptions exist in the tax code for specific penalty types.

How to Request Abatement

For simple requests, call the IRS or include an explanation with your return. For documented requests, write a formal letter explaining why penalties should be removed, with supporting evidence. Keep copies of everything you submit.

After paying the penalty, you can file Form 843 (Claim for Refund and Request for Abatement) to request a refund. You can also request abatement before paying if penalties are on your balance.

What to Include in Your Request

Effective abatement requests include the specific penalties you're requesting removal for (with amounts), the tax years involved, the specific reason penalties should be removed, supporting documents, and a statement that you've corrected the issue and will comply going forward.

Be specific and honest. Vague claims of hardship without documentation rarely succeed.

If Your Request Is Denied

IRS denial isn't final. You can request reconsideration with additional information, appeal to the IRS Office of Appeals, or if you've paid the penalty, file a refund claim and then sue in court if denied.

The appeals process often succeeds where initial requests fail. Appeals officers have more authority and discretion than frontline IRS employees.

Interest Cannot Be Abated

While penalties can be removed, interest generally cannot be abated except in cases of IRS error that delayed resolution. Interest continues to accrue until the tax is paid in full—even if penalties are removed.

Prevention Is Best

Avoiding penalties is easier than removing them. File on time, even if you can't pay—the failure-to-file penalty is much steeper. Pay what you can and set up installment agreements for the rest. Estimated tax payments for self-employment income prevent estimated tax penalties.

Getting Legal Help

Tax professionals experienced in IRS matters know how to present abatement requests effectively. They understand which arguments succeed and how to navigate the appeals process. For significant penalties, professional help often pays for itself in savings.