IRS Penalty Abatement: Getting Penalties Removed
IRS penalties add up fast. A failure-to-file penalty runs 5% per month. Failure-to-pay runs 0.5% per month. Add interest on top of that, and your original tax bill can double. The good news? There are specific legal grounds to get penalties removed.
Reasonable Cause
The IRS will abate penalties if you can show reasonable cause for your failure. Serious illness. Natural disaster. Death of a family member. Reliance on a tax professional who gave you bad advice. The key is documentation. I build the case and present it the way the IRS wants to see it.
First-Time Penalty Abatement
If you have a clean compliance history — meaning you filed and paid on time for the three years before the penalty year — you may qualify for first-time abatement. The IRS doesn't advertise this. Most taxpayers don't know it exists. I use it constantly.
How Much Can Be Removed
Depending on your situation, penalty abatement can save you thousands or even tens of thousands of dollars. The penalties themselves also accrue interest, so removing the penalty also eliminates the interest on that penalty.
The Process
I prepare a written request to the IRS citing the specific Internal Revenue Manual provisions and legal authority that support your case. If the initial request is denied, I appeal. Most penalty abatement requests I submit are granted.