IRS Penalty Abatement: How to Get Penalties Removed

IRS penalties can add 25% or more to your tax bill — but the IRS removes billions of dollars in penalties every year. If you’ve had a clean tax history for the past 3 years, you may qualify for first-time abatement and get those penalties wiped out with a single phone call. Use our penalty abatement estimator to see how much you could save before you call.

What Is IRS Penalty Abatement?

Penalty abatement is the IRS process of reducing or eliminating penalties assessed on your tax account. The IRS has the authority under IRC Section 6724 and related provisions to waive penalties when certain conditions are met. This is not a special program reserved for accountants — any taxpayer can request it.

Which Penalties Can Be Abated?

The three most common penalties eligible for abatement are:

Failure-to-File (FTF) Penalty

• Rate: 5% of unpaid tax per month (or partial month), capped at 25%
• Example: $10,000 owed, filed 6 months late = $2,500 penalty
• Minimum: $435 (or 100% of unpaid tax if less) when return is over 60 days late

Failure-to-Pay (FTP) Penalty

• Rate: 0.5% of unpaid tax per month, capped at 25%
• Reduced to 0.25% while an active installment agreement is in place
• Example: $10,000 unpaid for 12 months = $600 penalty

Accuracy-Related Penalty

• Rate: 20% of the underpayment attributable to negligence or substantial understatement
• Applies when you understate your tax liability by more than $5,000 or 10% of correct tax, whichever is greater

Failure-to-Deposit Penalty (Business)

• Applies to employers who don’t deposit payroll taxes on time
• Ranges from 2% to 15% depending on lateness

First-Time Abatement (FTA): The Easiest Path

First-time abatement is an administrative waiver — it requires no documentation, no proof of hardship, and no IRS form. According to the IRS Internal Revenue Manual (IRM 20.1.1.3), you qualify if you meet all three criteria:

1. Clean filing history: No penalties (other than estimated tax) for the prior 3 tax years
2. Filed or filed an extension: The return is filed (or an extension was granted) for the year in question
3. Paid or arranged to pay: You’ve paid or entered into an installment agreement for any tax owed

That’s it. If you’ve been compliant for 3 years, you’re entitled to this waiver regardless of your reason for being late.

How to Request FTA by Phone (Fastest)

1. Call the IRS at 1-800-829-1040 (have your SSN and the tax year ready)
2. Tell the representative: “I’d like to request first-time abatement for the [year] failure-to-file/failure-to-pay penalty under the administrative waiver.”
3. The representative can research your account history on the spot
4. If approved, you’ll receive a written confirmation within 2–4 weeks and the penalties are removed from your account

Success tip: Call early in the morning (7–9 AM local time) when wait times are shortest. Be polite and specific — use the exact phrase “first-time abatement administrative waiver.”

Reasonable Cause Abatement

If you don’t qualify for FTA — or if you had a legitimate reason for non-compliance — you can request abatement based on reasonable cause. The IRS defines reasonable cause as circumstances beyond your control that prevented you from meeting your tax obligation.

Qualifying Reasonable Cause Scenarios

Per IRM 20.1.1.3.2, the IRS recognizes these as potentially valid:

• Serious illness or injury — yours, a spouse’s, or a dependent’s that prevented you from filing or paying
• Death of an immediate family member close to the filing deadline
• Natural disaster — fire, flood, hurricane that destroyed records or prevented access
• Erroneous IRS advice — you followed written guidance from the IRS that turned out to be wrong (requires documentation)
• Inability to obtain records — despite reasonable effort, you couldn’t access records necessary to file
• Financial hardship — this works better for failure-to-pay than failure-to-file; must show you truly could not pay without extreme hardship

What does NOT qualify: Busy schedule, forgot the deadline, relied on a tax professional who was simply wrong (though preparer errors can sometimes qualify in egregious cases).

How to Request Reasonable Cause Abatement

Option 1: Written Letter (Most Common)

You don’t need Form 843 for a first request. Write a letter that includes:

• Your name, SSN/EIN, and address
• The tax year(s) and penalty amount you’re contesting
• A clear explanation of the circumstances and specific dates
• Supporting documentation (medical records, insurance claims, death certificates, etc.)
• A closing statement that the failure was not due to willful neglect

Mail to: The IRS address on your most recent notice, or the service center that processed your return.

Option 2: Form 843 (Claim for Refund and Request for Abatement)

Use Form 843 if:

• You’ve already paid the penalty and want a refund
• You prefer a formal submission process
• You’re requesting abatement for multiple tax periods

Key fields on Form 843:

• Box 5a: Enter the type of tax (income, employment, etc.)
• Box 7: Check “Penalty” and enter the IRC section (e.g., 6651 for FTF/FTP)
• Box 8: Explain your reasonable cause in plain language

Option 3: Phone Request

For a quick informal attempt, call 1-800-829-1040 and explain your circumstances. IRS representatives can approve reasonable cause abatement on the phone for straightforward cases, though complex situations are better handled in writing with documentation.

Administrative Waiver vs. Statutory Exception vs. Reasonable Cause

The IRS recognizes three official penalty relief categories (IRM 20.1.1.2):

Category	Example	Documentation
Reasonable cause	Illness, disaster, IRS error	Required (letters, records)
Statutory exception	Returns due during federally declared disaster	None — IRS applies automatically
Administrative waiver (FTA)	Clean 3-year compliance history	None — verbal request sufficient

After You Submit Your Request

• The IRS will send a letter acknowledging your request
• If approved: your account is adjusted and any overpayment becomes a refund or credit
• If denied: you have the right to appeal within 60 days using IRS Form 12009 (Request for an Appeal of a Levy) or by writing to the address on the denial letter
• You can also escalate to the Office of Appeals, which makes independent decisions

Penalty Abatement Letter Template Tips

If writing a reasonable cause letter, structure it like this:

1. Opening: State what you’re requesting and for which tax year and penalty
2. Facts: Tell the story in chronological order with specific dates
3. Causation: Connect the circumstances directly to the failure to file or pay
4. Ordinary care: Explain what you did to try to comply despite the circumstances
5. Closing: Assert that the failure was not willful neglect and request penalty removal
6. Attachments: List every document you’re enclosing

Keep it factual and brief — 1 to 2 pages is ideal. Avoid emotional language.

Sources

• IRS: Penalty Relief Due to First Time Abate or Other Administrative Waiver
• IRS Form 843 Instructions
• IRS: Penalties — Understanding Your IRS Notice
• IRS Internal Revenue Manual 20.1.1

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