IRS Penalty Abatement and Relief
Penalties can add significantly to a tax balance — sometimes more than the original tax itself. In some situations, the IRS will reduce or remove penalties based on specific criteria. Whether relief is available depends on the facts.
What types of penalty abatement exist?
The IRS has several programs for reducing or removing penalties. Not all penalties qualify for every type of relief. Eligibility depends on the penalty type, the taxpayer's compliance history, and the specific circumstances that led to the penalty.
Penalty removal is not guaranteed. An intro call can help evaluate whether the facts support a request and what the realistic prospects are.
First-Time Abatement (FTA)
Available to taxpayers with a clean compliance history — no penalties in the three prior years. Applies to failure-to-file, failure-to-pay, and failure-to-deposit penalties. One of the more straightforward relief programs. Note: IRS rules around FTA eligibility may be subject to change; current qualification criteria should be confirmed at the time of any request.
Reasonable Cause Relief
Available when a taxpayer can demonstrate that the failure to file or pay was due to circumstances beyond their control — illness, natural disaster, reliance on incorrect professional advice, or similar events. Requires documentation.
Statutory Exceptions
Certain penalties may be reduced or waived based on specific statutory provisions, including situations involving erroneous IRS written advice.
Administrative Waivers
The IRS occasionally issues administrative waivers for specific penalty types in response to systemic issues or disasters. These are not always widely publicized.
Penalty Relief Questions
What is the most common type of penalty abatement?
First-Time Abatement is the most straightforward. If you have a clean compliance history for the three prior years and have filed or arranged to file, you may qualify without needing to explain why the penalty occurred.
Can penalties be removed after I've already paid them?
In some cases, yes. A penalty abatement request can be filed even after a penalty has been paid. If approved, the IRS may issue a refund or apply the credit to other balances.
Does penalty abatement eliminate the underlying tax?
No. Penalty abatement addresses only the penalties — not the underlying tax or interest. The tax itself must still be addressed through payment or a separate resolution arrangement.
What is the failure-to-file penalty?
The failure-to-file penalty is typically 5% of the unpaid tax per month, up to 25% of the total unpaid tax. It applies when a return is not filed by the due date, including extensions. Filing — even if you cannot pay — stops this penalty from accruing.
Does Oregon have its own penalty abatement program?
Yes. Oregon has its own penalty and interest structure, and the Oregon Department of Revenue has a process for requesting penalty waiver based on reasonable cause. The criteria differ from the IRS program.
Penalties may be reducible. Let's find out.
An intro call can help evaluate whether penalty abatement is available based on your specific compliance history and circumstances.