IRS penalties are not inevitable. The Internal Revenue Code authorizes the IRS to impose penalties for failure to file, failure to pay, accuracy-related errors, and dozens of other compliance failures — but it also provides formal mechanisms for reducing or eliminating those penalties when the taxpayer has a legitimate basis for relief.

Most taxpayers pay penalties without ever asking for abatement. That is a mistake. The IRS abates billions of dollars in penalties each year through administrative procedures that are available to any taxpayer who qualifies.

Before discussing abatement, it helps to understand which penalties are most frequently imposed.

Failure to File (FTF) — IRC §6651(a)(1) 5% of the unpaid tax per month, up to 25%. The penalty begins the day after the return due date (including extensions). If the return is more than 60 days late, the minimum penalty is the lesser of $485 (2026) or 100% of the unpaid tax.

Failure to Pay (FTP) — IRC §6651(a)(2) 0.5% of the unpaid tax per month, up to 25%. The FTF and FTP penalties run concurrently, but the FTF penalty is reduced by the FTP penalty when both apply in the same month.

Accuracy-Related Penalty — IRC §6662 20% of the underpayment attributable to negligence, disregard of rules, or a substantial understatement of income tax (generally an understatement exceeding the greater of 10% of the correct tax or $5,000). The penalty increases to 40% for gross valuation misstatements.

Fraud Penalty — IRC §6663 75% of the underpayment attributable to fraud. This is the most severe civil penalty and requires the IRS to prove fraudulent intent by clear and convincing evidence.

Estimated Tax Penalty — IRC §6654 Imposed when a taxpayer fails to make adequate estimated tax payments. Calculated based on the underpayment amount and the applicable federal rate.

Information Return Penalties — IRC §6721/6722 Penalties for failure to file correct information returns (W-2s, 1099s) or failure to furnish correct payee statements. Penalties range from $60 to $660 per return (2026 amounts), with higher caps for intentional disregard.

First-Time Abatement (FTA) is an administrative waiver available under IRM 20.1.1.3.6.1 that allows the IRS to abate failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers who have a clean compliance history.

To qualify for FTA, the taxpayer must:

1. Have no penalties for the three tax years preceding the year for which abatement is requested (other than estimated tax penalties);
2. Have filed all required returns (or filed a valid extension) for the year at issue; and
3. Have paid, or arranged to pay, all tax due for the year at issue (an installment agreement satisfies this requirement).

FTA is available for individuals, businesses, and tax-exempt organizations. It applies to the most recent year for which the taxpayer is requesting abatement — not to multiple years simultaneously.

FTA can be requested:

• By phone — call the IRS at the number on the penalty notice and ask for first-time abatement. This is the fastest method for straightforward cases.
• In writing — submit a written request to the IRS campus that issued the penalty notice, citing IRM 20.1.1.3.6.1 and the FTA criteria.
• Through the Online Payment Agreement tool — for certain penalty types, FTA can be requested online.

The IRS does not require the taxpayer to explain why the penalty was incurred for FTA purposes — only that the compliance history requirements are met.

For taxpayers who do not qualify for FTA, or for penalties not covered by FTA, reasonable cause abatement is available under IRC §6651(a) and related provisions.

Reasonable cause exists when the taxpayer exercised ordinary business care and prudence but was nevertheless unable to comply with the tax law. The IRS evaluates reasonable cause based on all the facts and circumstances.

Death, serious illness, or unavoidable absence — of the taxpayer or an immediate family member. The illness or absence must have prevented timely compliance.

Destruction of records — fire, flood, natural disaster, or other casualty that destroyed the taxpayer's records and prevented accurate filing.

Erroneous advice from the IRS — if the taxpayer relied on incorrect written or oral advice from an IRS employee, and the reliance was reasonable. Written IRS advice is stronger than oral advice.

Erroneous advice from a tax professional — reliance on incorrect advice from a competent tax advisor may support reasonable cause, but the taxpayer must demonstrate that the advisor was given all relevant facts and that the reliance was reasonable. United States v. Boyle, 469 U.S. 241 (1985), limits this defense for late filing — the taxpayer has a non-delegable duty to file timely, and reliance on an advisor to file does not excuse the failure.

Ignorance of the law — generally not sufficient by itself, but may be considered in combination with other factors, particularly for first-time filers or taxpayers with limited tax experience.

Financial hardship — inability to pay is not reasonable cause for failure to file, but may support abatement of the failure-to-pay penalty in limited circumstances.

United States v. Boyle is the leading Supreme Court case on reasonable cause for late filing. The Court held that a taxpayer cannot delegate the duty to file a timely return to a tax professional and then claim reasonable cause when the professional fails to file. The taxpayer has a personal, non-delegable obligation to ensure the return is filed on time.

Boyle does not apply to the accuracy-related penalty — reliance on a tax professional's advice about the correct treatment of an item can support reasonable cause for that penalty.

Reasonable cause abatement must be requested in writing. The request should:

1. Identify the specific penalty and tax year;
2. Describe the circumstances that prevented timely compliance;
3. Explain how those circumstances were beyond the taxpayer's control;
4. Demonstrate that the taxpayer acted in good faith and exercised ordinary business care and prudence; and
5. Include supporting documentation — medical records, insurance claims, correspondence with advisors, or other evidence.

The request should be submitted to the IRS campus that issued the penalty notice, or to the Appeals officer if the case is in Appeals.

In addition to FTA and reasonable cause, certain penalties are subject to statutory exceptions that apply regardless of the taxpayer's conduct.

Accuracy-Related Penalty — Substantial Authority The accuracy-related penalty does not apply if the taxpayer had substantial authority for the tax treatment of the item at issue. Substantial authority exists when the weight of authorities supporting the taxpayer's position is substantial relative to the weight of authorities supporting the contrary position. IRC §6662(d)(2)(B)(i).

Accuracy-Related Penalty — Adequate Disclosure The penalty does not apply to items that are adequately disclosed on the return (Form 8275 or Form 8275-R) and for which the taxpayer had a reasonable basis for the position. IRC §6662(d)(2)(B)(ii).

Accuracy-Related Penalty — Reasonable Cause and Good Faith The penalty does not apply to any portion of an underpayment for which the taxpayer demonstrates reasonable cause and good faith. IRC §6664(c).

Estimated Tax Penalty — Safe Harbors The estimated tax penalty does not apply if the taxpayer paid at least:

• 100% of the prior year's tax liability (110% if prior-year AGI exceeded $150,000); or
• 90% of the current year's tax liability.

When a taxpayer successfully reduces an assessment through audit reconsideration, the associated penalties are typically reduced proportionally. However, the taxpayer should specifically request penalty abatement as part of the reconsideration request — the IRS does not always automatically recalculate penalties when an assessment is reduced.

Always request FTA first. If the taxpayer has a clean three-year compliance history, FTA is the fastest and most reliable path to penalty relief. It does not require explaining the circumstances of the failure.

Document everything for reasonable cause. The IRS will not accept a general statement that the taxpayer had a good reason for the failure. Specific facts, dates, and supporting documentation are essential.

Request abatement before paying. Once a penalty is paid, the taxpayer must file a formal refund claim (Form 843) to recover it. Requesting abatement before payment is simpler and faster.

Consider the interest implications. Interest on penalties is not separately abatable — it follows the penalty. If the penalty is abated, the interest on the penalty is also eliminated.

IRS penalties are a significant and often avoidable cost. First-time abatement, reasonable cause, and statutory exceptions provide formal mechanisms for reducing or eliminating penalties for taxpayers who qualify.

If you have received an IRS penalty notice, contact us to evaluate whether abatement is available. Our team includes former IRS agents who understand the standards the IRS applies and how to present an effective abatement request.

Governing authority: IRC §§6651, 6654, 6662, 6663, 6664, 6721, 6722; IRM 20.1; United States v. Boyle, 469 U.S. 241 (1985); Rev. Proc. 84-35.

Related: IRS Collection Alternatives · IRS Appeals Rights · IRS Audit Reconsideration