Requesting Penalty Abatement

Penalties are often the first dollars we remove

Interest is statutory and rarely abated except where the IRS delayed. Penalties are discretionary. For many clients the fastest win is not an offer — it is getting failure-to-file, failure-to-pay, or failure-to-deposit penalties off the account so the installment agreement is smaller.

Penalties that can be removed

• Failure to file (usually 5% per month, capped at 25%)
• Failure to pay (0.5% per month, 0.25% while a qualifying installment agreement is in effect)
• Failure to deposit (payroll)
• Accuracy-related (negligence or substantial understatement)
• Estimated tax (Form 2210) — harder; often a waiver, not “reasonable cause” in the same sense

Three doors

• First-Time Penalty Abatement (FTA): administrative waiver if you have a clean three-year compliance history, filed the return, and paid or arranged to pay the tax. It is the cleanest path for a one-off late 1040 or 941. Ask for it in writing or on the phone; cite IRM 20.1.1.3.3.2.1.
• Reasonable cause: you used ordinary business care and still could not comply. Death, serious illness, disaster, inability to obtain records, and bad written IRS advice are the classic facts. “I forgot” and “I could not pay” are not reasonable cause for failure to file.
• Statutory and administrative exceptions: including some disaster declarations and IRS errors.

How to request

1. Pay or arrange the underlying tax. Abatement talks go better when tax is not still open-ended.
2. Write a dated letter (or use Form 843 where required) that ties facts to dates: what happened, when you could first comply, and what you did.
3. Attach proof: hospital records, death certificate, FEMA declaration, IRS correspondence.
4. If denied, use the appeal rights on the letter. Penalty appeals are often where FTA is granted after a campus denial.