IRS penalties can add 25% or more to what you owe — and the IRS will never tell you to ask for them back

The three paths to penalty relief

Most guides describe this as a two-option choice — First-Time Abatement or Reasonable Cause. There's actually a third, separate path that gets overlooked because it's usually buried as a footnote inside reasonable-cause explanations. Here's how the three compare:

These aren't mutually exclusive in the way people assume — see the note on sequencing in the First-Time Abatement section below. If more than one path could apply, which one you lead with can matter.

What IRS penalties actually are — and how fast they compound

The IRS assesses penalties automatically through its computer systems. Nobody reviews whether you deserve one. The three most common penalties are:

• Failure to File (FTF): 5% of unpaid taxes per month, up to 25%. This runs from the return due date, not when the IRS discovers you didn't file.
• Failure to Pay (FTP): 0.5% of unpaid taxes per month, up to 25%. This continues until the balance is paid in full.
• Accuracy-Related Penalty: 20% of the underpayment if the IRS determines you understated income or took an improper deduction.

These penalties also accrue interest from the original due date. Interest compounds daily. On a $100,000 balance, you could be looking at $25,000 in failure-to-file penalties, $25,000 in failure-to-pay penalties, and years of interest — before anyone from the IRS has even talked to you.

First-Time Abatement — the IRS's "one-time forgiveness," and the easiest penalty relief it offers

You won't find the phrase "one-time forgiveness" in any IRS publication — the official name is First-Time Abatement (FTA), and it's the most common way people search for it. It's an administrative waiver the IRS grants to taxpayers with a clean compliance history. It requires no proof of hardship, no special circumstances, and no lengthy explanation. If you qualify, the IRS is required to grant it.

The three requirements for FTA

1. No penalties in the prior three tax years for the same type of penalty (failure to file, failure to pay, or failure to deposit). The estimated tax penalty doesn't count against you.
2. All required returns filed — or extensions filed — for the year in question. You cannot get FTA for a year where you still haven't filed.
3. Tax paid or arranged. You must have paid the underlying tax, or be on an installment agreement or other formal arrangement with the IRS.

How to request FTA

FTA can be requested by phone or in writing. For many cases, a phone call to the IRS at the number on your notice is sufficient. State clearly: "I'm calling to request first-time abatement of the [failure to file / failure to pay] penalty for tax year [XXXX] under IRM 20.1.1.3.6.1." The IRS representative should be able to process it on the call.

This call doesn't have to be you personally. An enrolled agent, CPA, or attorney can make it on your behalf — but only once a Form 2848 (Power of Attorney and Declaration of Representative) is on file with the IRS for that tax year and penalty type. Without it, the IRS won't discuss your account with anyone but you.

Starting with 2025 returns filed in 2026, the IRS began applying FTA automatically for qualifying filers, meaning you may not need to call at all. For prior years, you still need to request it.

Reasonable Cause — when you have a real story

Worth noting on terminology: some guides use "penalty forgiveness" as an umbrella term covering this path too, not just FTA's "one-time forgiveness." The IRS doesn't use either phrase officially for either program — but if you've seen "IRS penalty forgiveness" attached to a reasonable-cause discussion, this is what it's referring to.

If you don't qualify for FTA — or if you have penalties across multiple years — Reasonable Cause relief allows the IRS to remove penalties when you can demonstrate that the failure was due to circumstances beyond your control and that you exercised ordinary business care and prudence.

Examples of reasonable cause the IRS accepts

• Serious illness or injury — yours or an immediate family member's — that prevented you from filing or paying
• Death of a family member close enough to have disrupted your affairs
• Natural disaster (fire, flood, hurricane, civil disturbance) affecting your records or ability to comply
• Inability to obtain records you needed, through no fault of your own
• Computer or system issues — including IRS e-file or payment system outages — that delayed an electronic filing or payment
• Unavoidable absence — incarceration, active military deployment, or hospitalization

"Computer or system issues" is a narrower category than it sounds — it covers things like an IRS e-file rejection you couldn't resolve before the deadline despite timely, repeated attempts, or a documented outage on the IRS's own Direct Pay or EFTPS system on the day you tried to pay. It generally does not cover your own software crashing or your internet going out, unless you can show the failure was genuinely outside your control and you acted promptly once it was resolved. If you're citing this reason, keep screenshots of error messages, confirmation or reference numbers, and timestamps — the IRS wants to see exactly when the system failed and when you succeeded once it was fixed.

There's a separate, related path if the IRS itself gave you wrong advice in writing — see Erroneous Written Advice below; it isn't technically part of reasonable cause, though guides often lump it in.

What the IRS does not accept

• Inability to pay — financial hardship alone doesn't remove penalties (but may qualify you for Currently Not Collectible status)
• Not knowing you had to file or pay
• Reliance on a tax professional purely for the ministerial act of filing on time — see the important distinction below
• Vague claims of being "too busy" or "stressed"

The reliance-on-a-professional distinction almost every guide gets wrong

This is one of the most misunderstood areas of reasonable cause, and it traces back to a single Supreme Court case: United States v. Boyle, 469 U.S. 241 (1985). Boyle drew a precise line that later courts have consistently followed:

• Not reasonable cause: hiring a preparer or attorney to timely file your return, and they simply missed the deadline. The Supreme Court called this a "nondelegable duty" — knowing your filing deadline requires no special expertise, so you can't blame a missed date on your preparer, even if they genuinely dropped the ball.
• Can be reasonable cause: relying on a professional's substantive advice about a matter of tax law — for example, being told (incorrectly) that you didn't need to file at all, or that a transaction wasn't taxable. That's a judgment call requiring real expertise, which is exactly the kind of reliance the reasonable cause standard is built to protect.

In practice: "my accountant said my extension was filed and it wasn't" almost never works. "My accountant told me this type of income wasn't reportable, and that turned out to be wrong" has a real shot — document exactly what you were told, when, and by whom.

How to submit a reasonable cause request

Write a letter addressed to the IRS Service Center that sent the penalty notice. Include:

• Your name, SSN or EIN, and the tax year(s) at issue
• The specific penalty you are requesting be abated and the amount
• A clear, factual explanation of the circumstances — dates, specific events, and how they prevented compliance
• Supporting documentation (medical records, death certificates, disaster agency records, insurance claims)
• A statement that you exercised ordinary business care and prudence before and after the event

Mail it certified with return receipt to the address on your notice. Allow 60-90 days for a response.

If an enrolled agent, CPA, or attorney is submitting this on your behalf, a Form 2848 authorizing them as your representative needs to be on file first — either attached to the request or already on record with the IRS for that tax year and penalty.

Sample reasonable cause letter

This is a template, not a form to copy word-for-word — the part that actually gets requests approved is the specific, documented explanation in the bracketed sections. Vague language in place of real detail is the single most common reason these get denied.

Send it certified mail with return receipt requested, and keep a copy of everything — the letter, the documentation, and the mailing receipt.

Erroneous Written Advice — the overlooked third path

Almost every guide online — including earlier versions of this one — treats this as a footnote inside reasonable cause. It isn't. It's a distinct statutory exception under IRC § 6404(f), with its own test, its own form, and its own logic: you're not asking the IRS for mercy, you're showing the IRS gave you the wrong answer in writing and you followed it.

The three-part test

1. You asked the IRS a specific tax question in writing — not a general inquiry, a question specific enough that a wrong answer to it would directly cause the error.
2. The IRS gave you an incorrect answer, in writing.
3. You relied on that written answer, and the reliance is what directly caused the penalty.

What counts as "written," and what doesn't

• Counts: a written response from the IRS to your written question — a letter, a written ruling, or documented correspondence addressing your specific facts.
• Doesn't count: a phone call with an IRS representative, even if you have their employee ID number and wrote down what they said. It also doesn't cover general guidance in IRS publications, instructions, or the IRS website — the advice has to have been given specifically to you, in response to your specific written question.

How to request it

File Form 843 (Claim for Refund and Request for Abatement), checking the box for abatement due to erroneous written advice. Attach:

• A copy of your original written question to the IRS
• A copy of the IRS's written response
• A clear statement of how you relied on that response, and how the reliance caused the penalty

Unlike reasonable cause, you're not building a narrative around hardship or circumstances — you're documenting a direct chain: you asked, they answered wrong in writing, you followed it, the penalty resulted. That narrower scope is exactly what makes it a cleaner case when the facts fit.

If your situation doesn't cleanly fit this test — verbal advice, general guidance, or advice from a paid preparer rather than the IRS itself — reasonable cause is the path to pursue instead.

How penalty abatement fits into a broader resolution strategy

Penalty abatement is rarely the complete solution on its own — it works best as part of a sequenced resolution plan. Here's how the pieces fit together:

Reducing the balance before negotiating a payment plan

If you're setting up an installment agreement, removing penalties first lowers the total balance — which means lower monthly payments and potentially staying below the $50,000 threshold for a streamlined agreement that doesn't require a lien.

Reducing the balance before filing an Offer in Compromise

An Offer in Compromise is based on your Reasonable Collection Potential (RCP) — what the IRS thinks it can collect. Penalties are part of the balance the IRS is comparing against your RCP. Removing $15,000 in penalties before filing an OIC can shift whether an offer is viable.

Combining with Currently Not Collectible status

If you qualify for Currently Not Collectible status, penalties stop accruing new collection pressure — but they're still on the account. Getting them abated before the collection statute expires means less to resolve when you're eventually back on your feet.

The interest on abated penalties also disappears

This is something almost nobody knows: when the IRS abates a penalty, the interest that accrued on that penalty is also automatically removed. Interest on the underlying tax balance continues — but the interest on the penalty itself disappears along with the penalty.

On a large balance where penalties have been accruing for several years, this can be a significant additional reduction on top of the penalty removal itself.

The statutory and administrative authority behind penalty abatement

Understanding exactly where FTA and Reasonable Cause come from in the law helps you make the strongest possible request — and understand why the IRS is required to grant FTA when you qualify.

IRC § 6651(a) — The penalty statute itself

26 U.S.C. § 6651(a)(1) imposes the failure-to-file penalty: 5% per month up to 25%. § 6651(a)(2) imposes the failure-to-pay penalty: 0.5% per month up to 25%. Both are subject to abatement under § 6651(c), which provides that neither penalty applies if the failure is due to "reasonable cause and not due to willful neglect."

This is the statutory basis for Reasonable Cause abatement. It is not a discretionary IRS program — it is a statutory exception to the penalty statute itself. If you meet the standard, the penalty does not legally apply.

IRM 20.1.1.3.6.1 — The First-Time Abatement administrative waiver

First-Time Abatement is not a statute — it is an administrative waiver documented in the Internal Revenue Manual at IRM 20.1.1.3.6.1. The IRM states that the IRS will abate the failure-to-file, failure-to-pay, or failure-to-deposit penalty for one tax period if the taxpayer:

1. Has not previously been required to file a return, or has no prior penalties (for the same penalty type) in the preceding three years
2. Has filed all required returns or filed a valid extension for the current period
3. Has paid or arranged to pay any tax currently due

The IRM language is specific: "If the taxpayer meets the criteria... the penalty must be abated." This is not discretionary. A revenue agent who denies an FTA request that meets all three criteria is acting contrary to the IRM, and the denial should be appealed.

IRM 20.1.1.3.2 — The Reasonable Cause standard

The Reasonable Cause standard is further defined in IRM 20.1.1.3.2: "The taxpayer exercised ordinary business care and prudence and was nevertheless unable to comply with the law." The IRM then lists specific circumstances that qualify:

• Death, serious illness, or unavoidable absence of the taxpayer or immediate family
• Fire, casualty, natural disaster, or other disturbance beyond the taxpayer's control
• Erroneous advice or information provided by an IRS officer or employee
• Ignorance of the law in certain situations (rare, requires specific facts)

The IRM also lists what does not qualify: reliance on a tax professional who failed to file on time (the taxpayer is responsible for their own returns), lack of funds alone, and ordinary negligence.

Rev. Proc. 84-35 — Partnership penalty relief

Partnerships and S-corporations have an additional avenue: Revenue Procedure 84-35 provides that a small partnership (10 or fewer partners, all of whom are individuals) can avoid the failure-to-file penalty entirely if all partners have reported their income and paid their share of partnership tax. This applies even without an FTA request.

The interest abatement separate provision — IRC § 6404

26 U.S.C. § 6404 allows the IRS to abate interest in two specific situations: (1) where the interest resulted from an IRS error or delay in performing a ministerial act (§ 6404(e)), and (2) where the interest accrued on an erroneous refund that the taxpayer did not know about. Interest abatement under § 6404 is separate from penalty abatement and requires a different showing — but is worth requesting when the IRS's own delay contributed to the balance growing.

IRC § 6404(f) — Erroneous written advice

26 U.S.C. § 6404(f) is the statutory basis for the erroneous-written-advice exception covered above: the IRS must abate a penalty or addition to tax attributable to a taxpayer's reasonable reliance on written advice the IRS itself provided in response to a specific written request. It's requested via Form 843, separately from a general reasonable-cause claim.

Frequently asked questions about IRS penalty abatement