How to request penalty abatement from the IRS

Before you start

Penalty relief is a request, not an entitlement. The IRS decides case by case, and nothing here predicts what it will do with yours. What you can control is knowing which kind of relief fits your facts and presenting them clearly.

Have the notice that shows the penalty, the tax period it covers, and the type of penalty in front of you. The penalty type matters because the relief rules differ. Think of a small-business owner who filed a quarterly payroll return late once after years of on-time filing, compared with a person whose records were lost in a flood; those two requests would rest on different grounds.

The two main routes

The IRS describes administrative relief, often called first-time abatement, which looks at your compliance history. It is based on a clean three-year history for the same type of return, and any earlier penalties must be absent or removed for reasonable cause or IRS error. It covers certain failure-to-file, failure-to-pay and failure-to-deposit penalties, and it does not cover accuracy-related penalties.

The second route is reasonable cause. The IRS may remove or reduce certain penalties when you acted in good faith and used ordinary care and prudence. Examples on the IRS page include fire or disaster, inability to obtain records, serious illness or a death in the family, and system problems. Relying on a tax professional, lack of knowledge, mistakes, and lack of funds alone generally do not qualify. The page also says reasonable cause does not apply to the estimated tax penalty.

Common snags

A frequent mistake is asking for the wrong relief. You do not have to name first-time abatement; the IRS says you can simply ask, and it will consider relief that fits. Another is leaving out the facts. A request that says only "please remove the penalty" gives the reviewer nothing to evaluate.

Also remember that interest tied to a penalty that is removed is adjusted along with it, so you do not need to request that separately. The IRS also describes an automatic exemption from penalty for certain returns beginning with later tax years, with a letter explaining the relief; check the IRS page to see whether your return type and year are covered.

Where the tool fits

Writing the timeline is the hardest part for many people. IRS Audit Defense Pro is software that helps you organize your facts and draft a response letter you review and send yourself. It is not a law firm, CPA or enrolled agent, and it gives no legal or tax advice. Whatever you use, make sure every statement in the request is something you can support with a document.

Step by step

1. Identify the penalty and the tax periodFind the notice that assessed the penalty. Write down the penalty type, the tax period or return, the notice number and the date. These details decide which relief might apply.
2. Check the administrative relief pageRead the IRS's administrative penalty relief page and compare your history with its criteria: the same return type, a clean record for the preceding three years, and a penalty type that the page lists. Check the page for the current rules, since they can change.
3. Prepare reasonable cause facts if neededIf the history does not fit, or you think your circumstances were beyond your control, write a dated timeline: what happened, when, how it kept you from filing or paying, and what you did once you could. Collect documents such as medical records, a disaster notice or correspondence.
4. Choose how to askThe IRS says you can call the number on your notice with the notice and your facts ready. If the call cannot resolve it, a written statement or Form 843 is the next step. Form 843 is used to claim a refund or request abatement of certain taxes, interest, penalties, fees and additions to tax.
5. Write or complete the requestState the penalty, the period and the relief you are requesting, then give your facts in order. Enclose copies of supporting documents. Keep the tone factual and brief.
6. Send it with proofMail or fax to the address or number on the notice, or to the address in the Form 843 instructions as applicable. Use certified mail or another method that gives you a receipt, and keep a full copy.
7. Watch for the response and decide on an appealThe IRS will reply in writing. If a request to remove a failure-to-file or failure-to-pay penalty is denied, the denial letter should explain your appeal rights. The IRS page says to ask for an Appeals conference, generally within 30 days of the date of that letter, and to include proof of timely filing or payment or your reasonable cause facts.

Frequently asked questions

Sources

• IRS: Administrative penalty relief
• IRS: Penalty relief for reasonable cause
• IRS: About Form 843
• IRS Appeals: Penalty appeal

Related guides

• Why you were charged an underpayment penalty, and what to checkThe underpayment of estimated tax penalty applies when you did not pay enough tax during the year through withholding or estimated payments, even if you paid the full balance at filing.
• Penalty abatement request letter sample (first-time relief)A penalty abatement letter names the penalty and tax period, describes your filing and payment history, asks the IRS to consider administrative relief and, if needed, reasonable cause, and lists what you enclose.
• Reasonable cause statement sample: telling the story of what happenedA reasonable cause statement explains, in dated order, what prevented you from meeting a requirement, how you tried to act with ordinary care and prudence, and what you did once the problem ended.
• You missed an IRS response date: what to do nextContact the IRS using the number or address on your notice as soon as you notice the date passed.
• How to appeal the results of an IRS auditIf you disagree with audit findings, respond to the letter that proposes the changes by the date it gives, which is generally 30 days.
• What to do when you owe the IRS and can't pay it allIf you owe the IRS and cannot pay in full, file on time anyway, pay what you can, and contact the IRS about a payment plan, a pause in collection if you cannot cover basic living costs, or in some cases an offer in compromise.