IRS Penalty Relief Explained

Penalties can make up a large share of what you owe the IRS. The good news is that some of them can be removed. Here are the main ways penalty relief works and how to ask for it.

Which Penalties Can Be Removed

Penalty relief most often applies to:

• Failure to file a return on time
• Failure to pay the tax shown on a return on time
• Failure to deposit payroll taxes on time

Interest generally cannot be waived on its own. When a penalty is reduced, though, the interest charged on that penalty is reduced too.

First-Time Abatement

The IRS offers administrative relief for taxpayers with a clean recent history. You may qualify if you:

• Had no significant penalties in the three tax years before the year in question
• Filed all currently required returns, or filed valid extensions
• Paid the tax due, or set up a payment plan and are current on it

First-time abatement does not require you to explain why you were late.

Reasonable Cause

If you do not qualify for first-time abatement, you may still get relief by showing reasonable cause: you used ordinary care and still could not meet your obligation. Examples can include serious illness, a natural disaster, or the inability to get records. Documentation matters, so keep anything that supports your explanation.

How to Ask

You can request relief by calling the number on your IRS notice, responding in writing, or filing Form 843. If the IRS denies your request, you can generally appeal.

Penalty Relief Is Not the Whole Answer

Removing penalties does not erase the underlying tax. If you still cannot pay the balance, options such as payment plans, currently not collectible status, or an offer in compromise may apply. See our guide on what to do if you owe the IRS.