IRS penalty abatement
IRS Penalty Abatement
Updated
IRS penalty abatement is a request that the IRS reduce or remove a penalty on your account. The IRS can grant it through first-time abatement, when the three years before the penalty were clean, or through reasonable cause, when something outside your control kept you from filing or paying on time. If a penalty is removed, the interest on that penalty is removed with it. The IRS decides every request. We prepare it, submit it, and help you pursue an appeal if it is denied.
Overview
IRS Penalty Abatement: The Essentials
Penalties pile up month after month, and interest runs on top of them, so a balance that has sat for a few years can be more penalty than tax. The tax itself generally stands. The penalties are the part the IRS can relieve when you meet its rules.
The IRS lists three kinds of penalty relief: first-time abatement, reasonable cause, and statutory exception. We check all three against your IRS account transcripts before we ask for anything, because the right request depends on which penalties were assessed and on what your filing history looks like.
How this case usually unfolds
Penalties Stacked on the Balance · Penalty Abatement
On older balances, penalties and the interest on them are often a big share of what is owed. The pattern: pull transcripts to total the penalties, check first-time abatement against your three-year history, and if that does not fit, document a reasonable-cause case and file Form 843.
Sound similar to yours?
No two cases are identical, but patterns repeat. Talk to one of our Enrolled Agents to find out which programs apply to your situation.
Get Free ConsultationFirst-Time Penalty Abatement: The Clean Three-Year Rule
First-time abatement, or FTA, is an administrative waiver. The IRS looks at the three tax years before the year of the penalty. You generally qualify when you filed the same type of return on time in each of those years and either had no penalties or had penalties that were later abated for reasonable cause or IRS error. The estimated tax penalty does not count against you. Businesses also need to show that a failure-to-deposit penalty was not waived four or more times in those three years.
FTA covers the failure-to-file, failure-to-pay and failure-to-deposit penalties, regardless of the amount. You do not have to say the words first-time abatement or send documents with your request. You call the number on your notice, or send a written statement or Form 843, and the IRS reviews your account. With FTA, the failure-to-pay penalty can keep building until the tax itself is paid, so what you do about the balance still matters.
Automatic Exemption From Penalty (AEP)
The IRS has announced a second administrative relief, Automatic Exemption from Penalty, beginning summer 2026. It applies to 2025 returns and later and to 2026 quarterly returns and later, for Forms 1040, 1065 and 1120 and for employment tax Forms 940, 941, 943, 944, 945 and CT-1. If you file or pay late but filed on time and paid the tax due for the prior three years (or 12 consecutive quarters), the penalty is not assessed in the first place.
You do not ask for AEP. The IRS applies it when your original return finishes processing and sends a letter explaining the relief. Under AEP the failure-to-pay penalty does not accrue on the unpaid tax, which is the main difference from FTA. Earlier years still run under the FTA rules, and penalties outside the covered set still need reasonable cause. If you received a penalty notice and believe you qualified for AEP, contact the IRS.
Reasonable Cause: What the IRS Accepts
Reasonable cause means you used ordinary care and prudence and still could not file or pay on time. The IRS decides case by case, looking at all the facts. For failure-to-file and failure-to-pay penalties, the IRS names fires, disasters, missing records, serious illness and system problems.
The IRS says relying on a tax professional, not knowing the rule, a simple mistake or oversight, and lack of funds by itself generally do not qualify, although the facts around a mistake can sometimes change the answer. Reasonable cause is also not available for some penalties, such as the estimated tax penalty.
Fire, Natural Disaster, or Civil Disturbance
A fire, a flood, a hurricane or a civil disturbance that damaged your home or business, or cut off your ability to file or pay. Disaster declarations and photos, insurance claims and repair records help show what happened and when.
Death, Serious Illness, or Unavoidable Absence
A death, serious illness or unavoidable absence affecting you or an immediate family member. A doctor's letter or hospital records with start and end dates show the period you could not handle the filing or payment.
Records You Could Not Get
Records needed to file correctly that you tried to get and could not. Copies of your requests and the replies show you acted with ordinary care instead of waiting.
System Problems With Electronic Filing or Payment
An IRS or software system issue that delayed a timely electronic filing or payment. Error messages, rejection notices and bank records show the attempt you made.
Statutory Exception: Written Advice From the IRS
A statutory exception is the third kind of relief. If you asked the IRS for advice in writing, received incorrect written advice back, and relied on it, the resulting penalty may qualify. The request includes a copy of the advice, an explanation of how you relied on it, and a copy of the penalty notice.
The same category covers returns and payments that were mailed on time or sent through an authorized e-file transmitter on time, and taxpayers affected by a federal disaster or serving in a combat zone.
Failure-to-File, Failure-to-Pay, and Failure-to-Deposit Penalty Rates
Knowing which penalty is on your account tells you how much of the balance could be affected. The IRS publishes a separate rate for each.
Failure-to-File Penalty
5 percent of the unpaid tax for each month or part of a month the return is late, up to 25 percent. In months when the failure-to-pay penalty also applies, the failure-to-file rate drops to 4.5 percent. A return more than 60 days late has a minimum penalty of $525 (for returns due after December 31, 2025) or 100 percent of the tax, whichever is less.
Failure-to-Pay Penalty
0.5 percent of the unpaid tax per month or part of a month, up to 25 percent. It drops to 0.25 percent a month while an approved payment plan is in place, for individuals who filed on time, and rises to 1 percent a month if the tax is not paid within 10 days of a notice of intent to levy.
Failure-to-Deposit Penalty
For payroll and other required deposits. It is 2 percent when the deposit is 1 to 5 days late, 5 percent at 6 to 15 days, 10 percent beyond that, and 15 percent when still unpaid more than 10 days after the first notice. The tiers replace each other and do not add up.
Estimated Tax and Accuracy-Related Penalties
Estimated tax penalties have their own relief rules, and reasonable cause does not apply to them. Accuracy-related penalties turn on reasonable cause and good faith, including the effort you made to report the correct tax.
What Happens to Interest When a Penalty Is Abated
When the IRS reduces or removes a penalty, it automatically reduces or removes the interest charged on that penalty. By law it cannot reduce interest on a penalty unless the penalty itself is reduced.
Interest on the tax keeps running until the balance is paid in full. That is why a request for abatement works best alongside a plan for the tax that remains.
How to Request IRS Penalty Abatement
Pull Transcripts and Total the Penalties
We get your IRS account transcripts to see which penalties were assessed, for which years, and how much of the balance is penalty rather than tax.
Request by Phone or in Writing
Some requests can be handled by phone, using the number on your notice, with the notice, the penalty and your reasons in front of you. If the IRS cannot approve it on the call, the request goes in writing: a statement or Form 843, Claim for Refund and Request for Abatement. We prepare and submit either one.
Build the Reasonable-Cause Case
If first-time abatement does not apply, we write out what happened, when, how it kept you from filing or paying, and what you did to comply, and attach the records that support it.
If the IRS Denies the Request
The notice that denies relief points you to the penalty appeal options. We review why the request was denied, add what was missing, and help you pursue an appeal. The Taxpayer Advocate Service is another route when a penalty cannot be resolved through normal channels.
Related Steps With the IRS
Penalty relief usually sits next to a few other things on the same account.
Unfiled Tax Returns
Missing returns keep the failure-to-file penalty growing. Filing them comes first.
IRS Payment Plan
An approved payment plan lowers the failure-to-pay rate to 0.25 percent a month for individuals who filed on time.
Free Consultation
Tell us which notice you received. A representative calls you back, and the consultation is free.
Discreet help
You Don't Have to Explain How It Happened
Owing the IRS can feel like something to hide. Plenty of the people who call us haven't told anyone, and some stopped opening the mail a while ago. That's far more common than it feels, and it's nothing we judge.
Your consultation is free and confidential. Once you hire us and Power of Attorney is on file, the IRS deals with us, so the calls and the back-and-forth stop landing on you.
How We Keep It Discreet
- A free, confidential first conversation
- No judgment about how it happened
- Once Power of Attorney is filed, the IRS contacts us
- Phone, secure document portal, and video, with no office visit
Federal programs
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Most tax debt is resolved through one of these nine programs. Which one fits depends on your numbers, your filing history, and assessment dates.
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Frequently asked
What People Ask About IRS Penalty Abatement
What Is IRS Penalty Abatement?
Who Qualifies for First-Time Penalty Abatement?
What Counts as Reasonable Cause for IRS Penalty Relief?
Does the IRS Remove Interest When It Abates a Penalty?
Can I Get the IRS Late Payment Penalty Removed?
How Do I Request IRS Penalty Relief?
What Happens If the IRS Denies My Penalty Abatement Request?
Will the IRS Waive Penalties Automatically?
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IRS Penalty Abatement in All 50 States
IRS representation is federal, so we handle IRS penalty abatement for clients in all 50 states, by phone, secure portal, and video. We keep dedicated local pages for the metros we serve most.
Florida local pages
Straight From the IRS
Sources: IRS publications, forms and pages that set these rules.
These links open in a new tab.
- IRS: Administrative penalty relief (FTA and AEP)First Time Abate, and the Automatic Exemption from Penalty replacing it.
- IRS: Penalty relief for reasonable causeWhat the IRS accepts as reasonable cause, and what it does not.
- IRS: Penalty relief due to statutory exceptionIncorrect written IRS advice, timely mailing, disaster areas and combat zones.
- Form 843: Claim for Refund and Request for AbatementThe form used to request abatement in writing.
- IRS: Penalty reliefEvery route to removing a penalty, from first-time abatement to statutory exception.
- IRS: Failure to file penaltyHow the penalty accrues, and the cap.
- IRS: Failure to pay penaltyThe 0.5% monthly rate, the 0.25% rate during an approved payment plan, and the 25% cap.
- IRS: Failure to deposit penaltyThe 2, 5, 10 and 15 percent tiers for late payroll deposits.
Links verified2026-08-26. irs.gov · taxpayeradvocate.irs.gov
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