Home / IRS Penalty Abatement
First-Time Abatement · Reasonable Cause
The penalties are the part of the bill the IRS will actually remove.
The IRS cannot waive tax because paying it is hard. It can, and routinely does, remove penalties when you qualify under its first-time policy or can show reasonable cause. Most people who qualify never ask.
The IRS removes penalties in three main ways. First-time abatement applies to failure-to-file, failure-to-pay, and failure-to-deposit penalties when you filed and paid on time for the three prior years, with no penalties or only penalties that were later abated. Reasonable cause applies when you exercised ordinary care and still could not comply, because of events such as serious illness, a death in the family, a disaster, or inability to obtain records. Statutory exceptions cover situations such as erroneous written advice from the IRS. Relief is requested by phone, by letter, or on Form 843, and a denial can be appealed.
The penalties involved
- Failure to file: 5 percent of the unpaid tax per month, up to 25 percent.
- Failure to pay: 0.5 percent per month, up to 25 percent.
- Failure to deposit employment taxes: 2 to 15 percent depending on how late.
- Accuracy-related: 20 percent of an understatement, common after a CP2000 or an audit.
- Estimated tax penalties, which have their own narrower waiver rules.
First-time abatement
This is an administrative waiver, and it is close to automatic when you meet the test:
- The same type of return was filed on time for the three prior years (twelve quarters for quarterly filers), with no penalties or with penalties that were abated for reasons other than first-time abatement.
- All currently required returns are filed, or a valid extension is in place.
- The tax is paid, or a payment plan is in place and current.
It covers one tax period. It does not apply to the accuracy-related penalty. You do not need to call it by name or give a reason, but you do have to ask.
Reasonable cause
The standard is whether you exercised ordinary business care and prudence and were still unable to comply. The IRS looks at what happened, when, how it prevented compliance, and how quickly you fixed things once it ended. Reasons the IRS recognizes include serious illness or death in the immediate family, fire or natural disaster, inability to obtain records, and certain mistakes after relying on a competent tax adviser with full information. Lack of funds, by itself, is not reasonable cause for failing to file, and is rarely enough for failing to pay.
A reasonable cause request is an argument built on evidence: medical records, insurance claims, a timeline. Requests that state conclusions are denied by a software tool the IRS uses to screen them. Requests that prove a timeline are granted or win on appeal.
The accuracy-related penalty
The 20 percent penalty has its own defenses. It does not apply where there was reasonable cause and good faith, such as reliance on a qualified preparer who had all the facts. The IRS must also show that the penalty was approved in writing by the examiner's supervisor at the right time. That procedural requirement is checked in every contested case, and it fails more often than one would expect.
Interest
Interest is set by statute and generally cannot be waived. When a penalty is removed, the interest that accrued on that penalty goes with it. Interest on the tax itself stays, except in narrow cases of unreasonable IRS error or delay.
If the request is denied
A denial letter explains how to request review by the Independent Office of Appeals. Appeals applies the same standards with more judgment and less software. You can also pay the penalty and claim a refund, which opens the door to court if it matters enough.
When a lawyer matters
For large penalties, reasonable cause arguments that depend on medical or personal facts, accuracy penalties tied to an audit, and international information-return penalties, which start at $10,000 per form and are assessed automatically. On balances where penalties are a few hundred dollars, a phone call you make yourself is usually enough, and you will be told so.
Official sources
The rules described on this page come from these primary sources. Check them, or the notice you received, for current figures and dates.
When to call
Penalty relief is worth pursuing if:
- Your filing and payment history was clean for the three years before the problem year.
- A serious illness, death, disaster, or similar event caused the late filing or payment.
- A 20 percent accuracy penalty was added after a CP2000 or an audit.
- Your business was charged failure-to-deposit penalties for one bad quarter.
- You received a $10,000 penalty for a late international information return.
- A penalty abatement request was already denied.
Common questions
Direct answers.
What is IRS first-time penalty abatement?
It is an administrative waiver that removes failure-to-file, failure-to-pay, and failure-to-deposit penalties for one tax period if you timely filed and paid for the three prior years, or had any penalties in those years abated for other reasons, and you are currently in filing and payment compliance.
How do I request penalty abatement?
Call the number on your notice, send a written statement, or file Form 843. You do not have to mention first-time abatement by name. For reasonable cause, explain what happened, when, how it prevented compliance, and what you did afterward, and attach proof.
What counts as reasonable cause?
Circumstances in which you used ordinary care and prudence but still could not comply, such as serious illness or a death in the immediate family, a fire or natural disaster, or inability to obtain necessary records. Lack of funds alone generally does not qualify.
Can the IRS waive interest?
Generally no. Interest is required by law. When a penalty is abated, the interest charged on that penalty is also removed, but interest on the underlying tax remains except in limited cases of unreasonable IRS error or delay.
Does first-time abatement apply to the 20 percent accuracy penalty?
No. The accuracy-related penalty is contested on reasonable cause and good faith, or on whether the IRS met its procedural requirements, including timely written supervisory approval.
What if my penalty abatement request is denied?
You can request review by the IRS Independent Office of Appeals. You can also pay the penalty and file a refund claim, which may be pursued in court if denied.
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Find out what part of your balance is penalty. It may not have to be paid.
Send a recent notice or an account transcript and a short description of what went wrong.