IRS Penalty Abatement: Get Tax Penalties Reduced or Removed

If the Internal Revenue Service has assessed a penalty against you for failure to comply with tax rules, you’re not alone. In fiscal year 2025, the IRS assessed about 46.7 million penalties totaling $33.1 billion on individual, estate and trust income tax accounts. Sometimes circumstances prevent you from meeting your obligations to the IRS despite your best efforts. If that is the case, it may be possible for you to reduce or eliminate your tax penalty by requesting an IRS penalty abatement. Some requests are approved on the spot, while others take a few months; here is how long the penalty abatement process takes. The agency will consider your situation and, if it decides that you qualify, it may remove the tax penalty so that you are no longer responsible for paying it. In the same year, the IRS abated 3.9 million penalties on those accounts, totaling about $7.5 billion.

On July 8, 2026, the IRS announced the Automatic Exemption from Penalty, or AEP. When the IRS processes an eligible original return, it now checks your record on its own. If you filed and paid on time for the three prior years (12 quarters for quarterly returns), it doesn’t charge the failure-to-file, failure-to-pay or failure-to-deposit penalty at all, and it sends a notice saying so.

1. Before AEPFirst-time abatement was granted only when someone asked for it.
2. July 8, 2026The IRS announces AEP.
3. Summer 2026AEP starts on eligible 2025 returns and 2026 quarterly returns.
4. NowSome people who qualify still get penalty notices, and first-time abatement has to be requested.
5. January 1, 2027First-time abatement ends for original returns due on or after this date. AEP replaces it.

Here’s what that means if you have penalties today. First-time abatement still has to be requested for 2024 and earlier tax year returns, 2025 quarterly returns, and 2025 returns the IRS processed before AEP began. AEP doesn’t cover accuracy-related penalties, daily delinquency penalties or information return penalties, and it doesn’t apply to estate and gift tax returns. If AEP doesn’t apply, reasonable cause relief and appeals are still available. We check your transcripts to see what the IRS already applied and request the rest.

The three most common penalties, and the ones first-time relief covers, are:

• Failure to deposit taxes
• Failure to pay
• Failure to file a tax return

Making arrangements with the IRS can prevent or reduce some of these penalties. For example, if you filed for an extension on your tax return allowing you to submit it at a later date, that would not be a violation of IRS rules, so there should be no failure-to-file penalty as long as you file by the extended deadline. An extension doesn’t give you more time to pay, though, so the failure-to-pay penalty and interest still apply to tax not paid by the original due date. Similarly, if you enter into an IRS installment agreement, the failure-to-pay penalty drops to 0.25% a month while the plan is in place, as long as you filed on time as an individual. If you fall behind on your payments, however, the IRS can end the agreement and restart collection, including a levy.

Just as there are different types of penalties, there are different types of IRS penalty relief. Each has its own qualification requirements and applies to different situations.

Not all penalties are eligible for penalty abatement. One of the most notable exceptions is the estimated tax penalty, which may be assessed against businesses or individuals who are self-employed, or anyone who didn’t have enough tax withheld. If you owe an estimated tax penalty, you cannot receive first-time or reasonable cause relief for it, though the IRS can waive it in the narrower cases listed under statutory exceptions below. On the other hand, it doesn’t count against you as a past penalty when requesting a penalty abatement.

Statutory exceptions to penalties deal with specific circumstances. The example cited by the IRS is receiving written advice from the IRS that is incorrect. In other words, if it was the IRS’ fault that you failed to comply with the rules and incurred a penalty, the agency may remove the penalty if it’s shown that you asked in writing, relied on the answer, and the answer was wrong. To do this, we submit the erroneous advice you received, your original written request for the advice, and the IRS notice showing the penalty, along with an explanation of how you relied on the advice. Other situations in which a statutory exception may apply include the following:

• You’re in a combat zone, or doing civilian work there, which extends your deadlines
• You live in a federally declared disaster area, which postpones your deadlines
• Your return or payment was mailed or e-filed on time, even though the IRS received it late
• You’ve recently become disabled, or you’re newly retired at age 62 or older, which can support a waiver of the estimated tax penalty for that year or the next when the underpayment had a reasonable cause
• You owed no tax liability for the preceding year, which generally means no estimated tax penalty this year

If a circumstance beyond your control prevented you from filing and/or paying taxes or penalties, the IRS may consider that a reasonable cause for penalty abatement. These circumstances include the following:

• Hospitalization, inpatient drug rehab or another unavoidable absence
• Serious illness and/or death of an immediate family member
• Fire or natural disaster
• Accidental destruction of records, or being unable to get them
• System problems that delayed an electronic filing or payment

Unlike first-time relief, which depends on your record, a reasonable cause request depends on your facts. An IRS employee weighs what happened and why it kept you from filing or paying, so how the case is presented matters.

However, you still have to demonstrate that you qualify. This means providing documented evidence of the circumstance, particularly in regard to the date(s) that it occurred. In addition, you must also be able to demonstrate through documentation that you made a good faith effort to meet your obligations in spite of the circumstance. We gather hospital or court records, a doctor’s letter with start and end dates, disaster records and anything else that backs up the timeline.

Though not impossible, it may be more difficult to receive a reasonable cause penalty abatement if you have past penalties on your record. The IRS may be reluctant to offer assistance if you have a history of violating the rules.

The IRS is clear that simple lack of funds is not enough to qualify for a reasonable cause abatement for a failure-to-deposit or failure-to-file penalty. However, these situations may qualify for a first-time penalty abatement. Relying on a tax preparer, not knowing a deadline, and simple mistakes generally aren’t enough on their own either, unless other facts show you tried to comply.

The first-time penalty abatement is the most widely available type of administrative waiver. However, many qualifying taxpayers do not understand it and so fail to take advantage of it. That is starting to change, since the IRS now applies the automatic exemption on many 2025 returns as it processes them.

Basically, the IRS may waive an eligible tax penalty if you have a clean record for the three tax years before it and you are otherwise in good standing with the IRS. In other words, if you haven’t had any tax penalties in those three years and have a history of filing and paying your taxes on time, you may qualify for a first-time penalty abatement. You also need to have filed all currently required returns, and paid or arranged to pay what you owe.

Estimated tax penalties do not count against you when requesting first-time penalty abatement, so if these are the only types of penalties you’ve incurred, you may still qualify. Penalties that were removed for reasonable cause don’t count against you either. Similarly, if you have a history of making arrangements with the IRS to file or pay taxes after the due date, that should not count against you.

If a request for a first-time penalty abatement is rejected but you still qualify, we ask the IRS to reconsider, or take it to appeal. This matters because the IRS uses a decision-support software tool to decide who qualifies for this form of penalty relief, and it has a known history of inaccuracy. A 2012 Treasury Inspector General report found the IRS hadn’t told about 1.45 million taxpayers that they qualified for first-time relief on 2010 penalties, which totaled close to $181 million.

1. We pull your IRS account

   We file a power of attorney and pull your account transcripts, so we see every penalty, the year it was charged, and whether the IRS already applied automatic relief.

2. We choose the right relief

   We check for a statutory exception or reasonable cause first. First-time relief depends on a clean three-year record, so we use it where it does the most good.

3. We make the request

   We present it by phone or in writing on Form 843, with the explanation and records that back it up.

4. We follow through

   If the IRS says no, we ask for reconsideration or appeal. Once penalties come off, we confirm the interest on them is gone and help with what’s left.

If you don’t qualify for abatement, there may be other tax relief options available. Even when penalties come off, the tax and its interest are still owed, so we look at the whole balance.

If the IRS is already taking money, see how we help stop an IRS wage garnishment, or read how the IRS Fresh Start program works. Find out what Anthem Tax Services can do for you.