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IRS Penalty Abatement: How to Get IRS Penalties Removed

By Jon Call, EA: Enrolled Agent & NTPI Fellow • CLAW Tax Group

An IRS penalty is not always final. The IRS can remove or reduce the failure to file, failure to pay, and failure to deposit penalties, and several others, when you meet its relief rules. The interest charged on a removed penalty comes off with it.

Penalty abatement does not touch the tax. It cuts the add ons. The failure to file and failure to pay penalties can each reach 25% of the unpaid tax, so on a balance that sat for a while, relief can matter.

Short answer: IRS penalty abatement removes or reduces an IRS penalty. CLAW Tax Group’s Enrolled Agents request it three ways: First Time Abate if your prior three years are clean, reasonable cause if events beyond your control kept you from filing or paying, or a statutory exception such as incorrect written IRS advice. Interest on the removed penalty comes off too.

Matthew Wildes, JD, CPA of Wildes At Law joins when the matter needs an attorney.

Which IRS penalties can be abated?

The IRS relief rules cover three penalties most broadly: failure to file under IRC 6651(a)(1), failure to pay under IRC 6651(a)(2) and (a)(3), and failure to deposit under IRC 6656. All three qualify for First Time Abate and for reasonable cause.

The IRS also lists accuracy related, information return, dishonored check, and estimated tax penalties among those eligible for some form of relief (IRS penalty relief). Here is what each of the big three costs, as the IRS states it:

  • Failure to file. The penalty is 5% of the tax due, less tax paid on time and credits, for each month or part of a month the return is late, up to 25%. If the return is more than 60 days late, the minimum penalty is $525 for returns due after December 31, 2025, or 100% of the tax owed, if less (IRS failure to file penalty).
  • Failure to pay. The penalty is 0.5% of the unpaid tax for each month or part of a month, up to 25%. It drops to 0.25% a month during an approved payment plan if you filed on time as an individual. It rises to 1% a month if the tax is still unpaid 10 days after an IRS notice of intent to levy (IRS failure to pay penalty).
  • Both in the same month. The failure to file penalty is reduced by the failure to pay penalty. The combined charge for that month is 5%: 4.5% for filing late and 0.5% for paying late.
  • Failure to deposit. For employment tax deposits, the penalty is 2% if the deposit is 1 to 5 days late, 5% at 6 to 15 days, and 10% after 15 days. It is 15% if the amount is still unpaid more than 10 days after the first IRS notice, or on the day you get a notice demanding immediate payment (IRS failure to deposit penalty).

Some penalties are harder to remove. First Time Abate does not cover the 20% accuracy related penalty, which needs reasonable cause and good faith instead (IRS accuracy related penalty). Our substantial understatement penalty guide covers those defenses. The estimated tax penalty generally cannot be waived for reasonable cause; see what triggers the IRS underpayment penalty. Some returns are outside First Time Abate, including Forms 706, 709, 3520, and the Form 1099 series (IRM 20.1.1.3.3.2.1).

For how the failure to file and failure to pay penalties stack, see failure to file vs failure to pay penalty.

How do I qualify for First Time Abate?

Check First Time Abate first, because the IRS considers it before reasonable cause. You generally qualify if you filed the same type of return on time for the three prior tax years, and those years have no penalties other than an estimated tax penalty.

A penalty that was later removed for reasonable cause or IRS error does not count against you.

  • It covers three penalties. First Time Abate removes failure to file, failure to pay, and failure to deposit penalties, and the IRS says the amount does not matter (IRS administrative penalty relief).
  • It works one tax period at a time. The IRS applies it to a single tax period. A First Time Abate granted in the three year look back blocks a new one (IRM 20.1.1.3.3.2.1).
  • Quarterly filers look back 12 quarters. Quarterly filers need 12 consecutive quarters of clean history. Businesses are also out if the failure to deposit penalty was waived four or more times in the three prior years, or was charged for avoiding EFTPS.
  • You do not have to name it. The IRS says you do not need to ask for First Time Abate by name or send documents. It reviews your account history.
  • Unpaid tax keeps the clock running. If the tax is not paid in full, the IRS can remove the failure to pay penalty charged so far, but the penalty keeps accruing on the unpaid tax. Once you pay in full, the added failure to pay penalty can be removed too.

If you ask for reasonable cause but qualify for First Time Abate, the IRS applies First Time Abate. Its approval letter says this type of removal is available one time, and that future penalties will be judged on reasonable cause (IRM 20.1.1.3.3.2.1).

What is the Automatic Exemption from Penalty?

There are now two programs to check, because the IRS is moving First Time Abate to the Automatic Exemption from Penalty (AEP) starting in summer 2026. Under AEP, if you filed and paid on time for the three prior years, or 12 consecutive quarters, the IRS does not assess the late filing, late payment, or late deposit penalty at all.

  • Which years. AEP applies to 2025 tax year returns and later, and to 2026 quarterly returns and later.
  • Which forms. Forms 1040, 1065, and 1120, and the employment returns: Forms 940, 941, 943, 944, 945, and CT-1.
  • What you get. A letter explaining that AEP was applied. You do not need to contact the IRS. You still owe the tax, the interest, and any other penalty.
  • What changes. Under AEP, the failure to pay penalty does not accrue on the unpaid tax. Under First Time Abate, it can keep accruing until the tax is paid.
  • What stays. First Time Abate still applies to earlier years, and to 2025 returns and 2026 quarterly returns that were not considered for AEP. If a notice shows an assessed penalty and you think you qualified for AEP, contact the IRS (IRS administrative penalty relief).

What counts as reasonable cause for IRS penalty relief?

Every reasonable cause request turns on one IRS test: you used ordinary business care and prudence, and you still could not file or pay on time. The IRS decides it case by case, on all the facts.

The IRS lists these as circumstances that may qualify (IRS penalty relief for reasonable cause):

  • Fires, natural disasters, or civil disturbances.
  • Not being able to get your records.
  • Death, serious illness, or unavoidable absence of you or a member of your immediate family.
  • System issues that delayed a timely electronic filing or payment.

The IRS says these generally do not qualify on their own: relying on a tax professional to file or pay, not knowing the rule, mistakes and oversights, and lack of funds.

The IRS reviewer asks a set of questions (IRM 20.1.1.3.2). What happened, and when? How did it keep you from complying? How did you handle the rest of your affairs during that time? What did you do once things changed? If you do not comply within a reasonable time after the problem ends, reasonable cause ends too.

Documents carry the request. The IRS points to hospital or court records, a doctor’s letter with start and end dates, disaster documentation, and copies of letters or receipts. The IRS reviewer checks that your dates and explanation line up with the events behind the penalty (IRM 20.1.1.3.2.2).

What statutory exceptions remove IRS penalties?

Sometimes the law itself excuses the penalty. The IRS lists incorrect written advice from the IRS, a return mailed on time, a federal disaster area, and a combat zone as statutory grounds for relief.

  • Incorrect written IRS advice. IRC 6404(f) requires the IRS to abate a penalty caused by its incorrect written advice when the advice answered your specific written request, you reasonably relied on it, and the penalty did not come from inadequate or inaccurate information you gave. Send a copy of the IRS advice, an explanation of how you relied on it, and the penalty notice. Form 843 is generally required (IRM 20.1.1.3.3.4; IRS penalty relief due to statutory exception). Oral advice from the IRS can support relief where the penalty allows reasonable cause (IRM 20.1.1.3.3.4.2).
  • Mailed on time. A paper return mailed on or before the due date, properly addressed with enough postage, through the U.S. Postal Service or a designated private delivery service, counts as on time (IRC 7502). A timely electronic return that the IRS system rejected counts as on time if you resend or mail it within 10 days of the rejection notice.
  • Disasters and combat zones. IRC 7508A lets the IRS postpone certain deadlines because of a federally declared disaster, and IRC 7508 postpones deadlines for service in a combat zone. If either applies, you may qualify for penalty relief.

How do I request IRS penalty abatement?

Follow the way the IRS processes requests: call first when the notice allows it, then put it in writing on Form 843 or a signed letter when the phone cannot approve it.

  1. Read the notice. Check the penalty, the tax period, and the amount. If the IRS information is wrong, follow the notice instructions. Fixing the underlying problem can mean no penalty applies (IRS penalty relief).
  2. Call the number on the notice. Have the notice, the penalty you want removed, and your reasons ready. If you qualify for First Time Abate, the IRS applies it.
  3. Put it in writing. If the phone cannot approve it, use Form 843, Claim for Refund and Request for Abatement, and enter the IRC section of the penalty (About Form 843). Explain what happened and when, how it kept you from complying, and what you tried to do. Attach the documents.
  4. Claim a refund if you already paid. A refund claim is generally due within 3 years from the date you filed the original return or 2 years from the date you paid, whichever is later.
  5. Authorize your representative. Attorneys, CPAs, and Enrolled Agents have unlimited representation rights before the IRS (IRS credentials overview). Form 2848 lets us speak for you on the penalty years.

If the balance is still open after relief, we pair the abatement with a payment plan, an Offer, or Currently Not Collectible status. See IRS installment agreement, Offer in Compromise, and Currently Not Collectible.

Does penalty abatement remove IRS interest?

Expect partial interest relief. When the IRS removes a penalty, it automatically reduces the interest charged on that penalty, but interest on the tax itself stays. The IRS says it does not remove or reduce interest for reasonable cause or as first time relief (IRS interest).

Interest on the tax can be abated only in narrow cases under IRC 6404(e): an unreasonable error or delay by an IRS employee in a ministerial or managerial act (IRS interest abatement). The IRS adds conditions:

  • The error or delay happened after the IRS contacted you in writing about the tax.
  • You and your representative did not contribute to it.
  • The tax is income, estate, gift, or certain excise tax. Employment tax does not qualify.
  • Only interest that built up during the error or delay can come off.
  • The claim is filed within 3 years of filing the return or 2 years of paying the tax, whichever is later.

The request goes on Form 843 or a signed letter, and a denial can be appealed. A Tax Court review of an interest abatement denial under IRC 6404(h) is attorney work. Matthew Wildes, JD, CPA handles it through Wildes At Law. More on how interest runs: IRS interest on unpaid taxes.

What if the IRS denies my penalty abatement request?

You can usually appeal the denial. You generally have 30 days from the date of the rejection letter to ask for an appeal, and the letter states the exact deadline.

The IRS Independent Office of Appeals hears penalty appeals when four things are true (IRS penalty appeal):

  • The IRS assessed a failure to file or failure to pay penalty and sent you a letter.
  • You sent the IRS a written request to remove it.
  • The IRS denied the request.
  • The denial letter gives you appeal rights.

A phone denial is not the end. An appeal needs a written request and a denial letter, so put the request in writing. If you claim you filed or paid on time, send proof with the appeal: a copy of your proof of timely filing, or the front and back of the cancelled check. If the dispute moves to court, that is attorney work, and Matthew Wildes, JD, CPA handles it through Wildes At Law.

Who handles penalty abatement at CLAW Tax Group

Jon Call, EA and our Enrolled Agents handle administrative penalty relief on Form 2848: the transcripts, the First Time Abate and AEP check, the reasonable cause letter, Form 843, and the Appeals request. Matthew Wildes, JD, CPA handles attorney work, such as Tax Court petitions and litigation, through Wildes At Law. For how the credentials differ, see tax attorney vs Enrolled Agent vs CPA.

What we do

When a penalty notice arrives, we start with IRS account transcripts for the penalty year and the three years before it. That shows which penalties posted, whether First Time Abate or AEP should apply, and whether an earlier abatement blocks it.

Then the request follows the IRS order: the administrative waiver first, reasonable cause second, and a statutory exception where the facts support one. If a balance remains, we match it to a payment plan, an Offer, or Currently Not Collectible status. Trimming the bill is step one. Resolving the account is the job.

Call or text: (651) 323-2255
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CLAW Tax Group is a tax resolution firm based in White Bear Lake, Minnesota, serving clients in all 50 states. Affiliated with Wildes At Law.

References: IRC 6651(a)(1), 6651(a)(2), and 6651(a)(3); IRC 6656; IRC 6404(e), 6404(f), and 6404(h); IRC 7502, 7508, and 7508A; IRM 20.1.1.3.2 and 20.1.1.3.2.2; IRM 20.1.1.3.3.2.1; IRM 20.1.1.3.3.4 and 20.1.1.3.3.4.2; Treas. Reg. 1.6664-4; Instructions for Form 843 (Rev. 12-2024); IRS Penalty relief; IRS Administrative penalty relief; IRS Penalty relief for reasonable cause; IRS Penalty relief due to statutory exception; IRS Failure to file penalty; IRS Failure to pay penalty; IRS Failure to deposit penalty; IRS Accuracy related penalty; IRS Interest abatement; IRS Penalty appeal.

Frequently asked questions

Can the IRS waive penalties if I cannot afford to pay?
CLAW Tax Group’s answer starts with the IRS rule: lack of funds by itself is not reasonable cause for paying late. Relief can still fit when other facts show you used reasonable care and tried to comply, and First Time Abate does not depend on why you paid late. If you filed on time, an approved payment plan cuts the failure to pay penalty from 0.5% to 0.25% a month while the plan is in effect. Interest keeps running on the unpaid balance.
Can I get First Time Abate over the phone?
CLAW Tax Group’s answer is yes: the IRS says you can call the toll free number on your notice to ask for penalty relief. You do not have to name First Time Abate or send documents, because the IRS reviews your account history. If you ask for reasonable cause and qualify for First Time Abate, the IRS applies First Time Abate. If the phone cannot approve it, ask in writing with Form 843.
Can First Time Abate be used more than once?
First Time Abate is a one period tool. The IRS applies it to a single tax period, and a First Time Abate granted in the three prior years blocks a new one. The IRS approval letter says future penalties will be judged on reasonable cause. When several periods have penalties, the IRS example applies First Time Abate to the first period, and the later periods need reasonable cause.
Does First Time Abate apply to the accuracy related penalty?
CLAW Tax Group’s answer is no. First Time Abate covers only the failure to file, failure to pay, and failure to deposit penalties. The 20% accuracy related penalty needs reasonable cause and good faith. The IRS weighs your efforts to report correctly, the complexity of the issue, your tax knowledge, and whether you gave a competent advisor all the facts.
Can the estimated tax penalty be removed?
This one works differently, because the IRS says the estimated tax penalty generally cannot be waived for reasonable cause. It may be removed or reduced if the underpayment came from a casualty, disaster, or other unusual circumstance that would make the penalty unfair. It may also come off if you or your spouse retired in the past 2 years after reaching age 62, or became disabled, and you had reasonable cause. The request needs a written explanation signed under penalty of perjury.
Is relying on my tax preparer reasonable cause?
CLAW Tax Group’s answer depends on the penalty. For failure to file and failure to pay, the IRS says reliance on a tax professional generally is not reasonable cause, because you stay responsible for filing and paying on time. For the accuracy related penalty, the IRS may consider reliance on an advisor if you gave the advisor all the needed information and the advisor was competent and experienced with your tax situation.
Can I get a refund of IRS penalties I already paid?
CLAW Tax Group’s answer is yes, when relief applies and the claim is on time. A claim for refund, usually on Form 843, is generally due within 3 years from the date you filed the original return or 2 years from the date you paid, whichever is later. For a penalty caused by incorrect written IRS advice, the request is due within the time allowed to collect the penalty or, if you paid it, the time allowed to claim a refund.
What should a reasonable cause letter include?
Build it around the questions the IRS asks: what happened and when, how it kept you from filing or paying, what you tried to do, and how you handled the rest of your affairs. Attach proof with dates, such as hospital or court records, a doctor’s letter with start and end dates, disaster records, or copies of letters. Show that you filed or paid promptly once the problem ended, because reasonable cause ends when you do not comply within a reasonable time.
Does the Automatic Exemption from Penalty apply to my 2025 return?
CLAW Tax Group’s answer is yes for eligible returns. AEP starts with 2025 tax year returns on Forms 1040, 1065, and 1120, and with 2026 quarterly returns such as Form 941. If you filed and paid on time for the three prior years, the IRS does not assess the failure to file, failure to pay, or failure to deposit penalty and sends a letter explaining the relief. If a notice shows an assessed penalty and you think you qualified, contact the IRS.
How long do I have to appeal a denied penalty abatement request?
Watch this deadline closely: you generally have 30 days from the date of the rejection letter to ask for an appeal, and the letter states the exact deadline. The appeal follows a written request that the IRS denied in a letter giving appeal rights. If you had proof that you filed or paid on time, send a copy with the appeal.
Do I need a tax attorney for IRS penalty abatement?
CLAW Tax Group’s answer is usually no. First Time Abate, reasonable cause, and Appeals requests are administrative work, and attorneys, CPAs, and Enrolled Agents all have unlimited representation rights before the IRS. Jon Call, EA and our Enrolled Agents handle these requests on Form 2848. When a penalty dispute moves to court, Matthew Wildes, JD, CPA handles it as attorney work through Wildes At Law.