IRS Penalty Abatement Explained

IRS penalties can add 25% or more to your tax balance. The failure-to-file penalty under IRC §6651(a)(1) runs 5% per month up to 25%. The failure-to-pay penalty under §6651(a)(2) runs 0.5% per month up to 25%. Stack both together and you can nearly double the original tax.

The good news: penalties are often the easiest part of a tax debt to eliminate.

First-Time Abatement

This is the lowest-hanging fruit. Under IRM 20.1.1.3.6.1, the IRS will remove failure-to-file and failure-to-pay penalties for any tax year if you had no penalties in the three prior years, you have filed all required returns, and you have paid or arranged to pay any tax due. You do not even need a reason. Clean compliance history is enough.

Reasonable Cause

If first-time abatement does not apply, you can request removal under reasonable cause per IRC §6651(a). The IRS must determine that you exercised ordinary business care and prudence but were still unable to comply. Death, serious illness, natural disaster, fire, reliance on a tax professional — these are the classic grounds.

The standard is not perfection. IRM 20.1.1.3.2 states that reasonable cause relief requires showing you exercised ordinary business care and prudence. You do not have to prove it was impossible to comply — just that you made a genuine effort.

How to Request It

You can call the IRS for first-time abatement. For reasonable cause, put it in writing with supporting documentation. A well-constructed penalty abatement letter with specific IRM citations is far more effective than a phone call. We draft these regularly and know what works.

Tax attorney Darrin Mish has spent 32 years getting taxpayers out of IRS trouble. Free consultation — no obligation.