IRS Penalty Abatement

Reduce or Remove IRS Penalties Before They Continue to Grow

IRS penalties can add thousands of dollars to your tax debt, making an already difficult situation even more expensive. In many cases, however, taxpayers may qualify to have certain penalties reduced or removed.

Whether you have a one-time filing mistake, a compelling reason for filing or paying late, or another qualifying circumstance, penalty relief may be available.

Understanding **which type of penalty relief applies—and how to request it—is the first step toward reducing your balance.

What Is Penalty Abatement?

Penalty abatement is the process of requesting that the IRS remove or reduce certain tax penalties.

While the IRS generally expects taxpayers to file and pay on time, it also recognizes that mistakes happen and that life events sometimes make compliance impossible.

Depending on your circumstances, penalty relief may be available through:

First-Time Penalty Abatement (FTPA)
Reasonable Cause Penalty Abatement
Administrative relief
Statutory exceptions

This page focuses on the two forms of relief most commonly available to individual taxpayers and small business owners: First-Time Penalty Abatement and Reasonable Cause Penalty Abatement.

Which IRS Penalties Can Be Removed?

Penalty abatement may apply to several common IRS penalties, including:

Failure-to-File penalties
Failure-to-Pay penalties
Failure-to-Deposit penalties (primarily for businesses)
Certain other penalties, depending on the circumstances

Interest generally continues to accrue on unpaid tax. However, if the IRS removes a penalty, the related interest on that penalty is also reduced or removed. Interest on the underlying tax generally remains due.

First-Time Penalty Abatement (FTPA)

One of the most valuable—and frequently overlooked—forms of relief is First-Time Penalty Abatement.

Unlike Reasonable Cause, First-Time Penalty Abatement is based primarily on your compliance history rather than the reason you filed or paid late.

Generally, taxpayers may qualify if they:

Filed required returns for the prior three years,
Have a history of timely compliance,
Have no significant penalties during that period (or previously removed penalties due to reasonable cause or IRS error), and
Have addressed any outstanding filing requirements.

For many taxpayers, this is the quickest path to penalty relief because it does not require proving extraordinary circumstances.

Important Update Beginning with the 2025 Tax Year

The IRS has announced a significant change to how first-time administrative penalty relief is provided.

Beginning with eligible 2025 individual tax returns (and 2026 quarterly business returns), the IRS is transitioning from the traditional First-Time Abate (FTA) request process to a new Automatic Exemption from Penalty (AEP) program.

Under AEP:

Eligible taxpayers generally do not need to request first-time relief.
If the IRS determines you qualify based on your compliance history, qualifying failure-to-file, failure-to-pay, and failure-to-deposit penalties generally will not be assessed in the first place.
During the transition period, some taxpayers may still receive penalty notices and may need to contact the IRS if they believe they qualified for relief.

This change is designed to simplify the process and help more taxpayers receive the relief they have historically been entitled to.

Reasonable Cause Penalty Abatement

Not everyone qualifies for First-Time Penalty Abatement.

When taxpayers experienced circumstances beyond their control, they may instead qualify for Reasonable Cause relief.

Unlike FTPA, Reasonable Cause requires explaining why compliance was not possible.

The IRS reviews each request based on its specific facts and circumstances.

Situations That May Support Reasonable Cause

Every case is different, but reasonable cause may exist when taxpayers experienced events such as:

Serious illness or hospitalization
Death or serious illness of an immediate family member
Natural disasters
Fire or casualty losses
Inability to obtain necessary records
Other circumstances demonstrating ordinary business care and prudence

Simply forgetting to file or lacking funds to pay does not automatically establish reasonable cause.

The IRS evaluates whether the taxpayer exercised ordinary business care and prudence under the circumstances.

Common Misconceptions

“The IRS automatically removes penalties if I ask.”

No.

Each request must qualify under the applicable administrative or legal standards.

“I can only request one type of penalty relief.”

Not necessarily.

If you don’t qualify for First-Time Penalty Abatement (or the new Automatic Exemption from Penalty), you may still qualify under Reasonable Cause or another form of relief.

“Penalty abatement eliminates my entire tax bill.”

Penalty relief removes qualifying penalties—not the underlying tax.

Interest related to removed penalties is generally adjusted, but interest on the unpaid tax generally continues until the tax is paid.

Why Penalty Relief Matters

IRS penalties can grow quickly.

Reducing or eliminating those penalties may:

Lower your overall balance due.
Improve cash flow.
Make an Installment Agreement more affordable.
Increase the feasibility of other resolution strategies.
Help taxpayers move toward long-term compliance.

For some taxpayers, penalty relief can save hundreds—or even thousands—of dollars.

Other Resolution Strategies

Penalty abatement is only one tool available to resolve IRS tax problems.

Depending on your circumstances, you may also benefit from:

Installment Agreements – Pay your balance over time.
Offer in Compromise – Settle qualifying tax debt for less than the full amount owed.
Currently Not Collectible (CNC) – Temporarily pause IRS collection when you cannot afford to pay.
Levy & Garnishment Relief – Address active IRS collection actions.

Frequently Asked Questions

Can I receive First-Time Penalty Abatement more than once?

Generally, it is intended as administrative relief for taxpayers with a qualifying compliance history. Eligibility depends on the specific return type, tax period, and IRS criteria.

Do I need to prove hardship for First-Time Penalty Abatement?

No. First-Time Penalty Abatement is based primarily on your compliance history rather than financial hardship.

What if I don’t qualify for First-Time Penalty Abatement?

You may still qualify for Reasonable Cause Penalty Abatement or another form of administrative relief.

Does penalty abatement remove interest?

Interest related to penalties that are removed is generally adjusted. Interest on the underlying tax generally continues until the tax is paid.

Can businesses request penalty abatement?

Yes. Businesses may qualify for certain forms of penalty relief, including failure-to-deposit penalty relief, depending on the facts and applicable IRS requirements.