If you’ve been penalized for late filing, late payment, or missed tax deposits, the IRS may provide options to reduce or remove your penalties under certain circumstances.
The IRS imposes penalties for a variety of reasons, most commonly for late filing or late payment of taxes. These penalties, along with interest, can quickly accumulate, but the IRS offers several relief options to help taxpayers reduce their financial burden.
Taxpayers who have been penalized for the first time may qualify for first-time penalty abatement. Eligibility requires:
Businesses may also request abatement for first-time failure-to-deposit penalties.
If you have a legitimate reason for failing to file, deposit, or pay taxes on time, you may qualify for penalty relief under reasonable cause. Common examples include:
Other circumstances may also qualify if you demonstrate that you exercised ordinary care and diligence but were unable to meet your tax obligations.
Certain statutory exceptions may allow penalty relief, including:
Active military personnel in combat zones may also be eligible for statutory exceptions.
The IRS may provide relief for the following penalties:
Failure-to-File (FTF): Relief may be granted if you qualify for first-time abatement, reasonable cause, or statutory exception.
Failure-to-Pay (FTP): Penalties may be reduced or waived under first-time abatement, reasonable cause, or statutory exception.
Accuracy-Related Penalties: Typically applied for underreported income or incorrect deductions; may be waived if you acted in good faith or demonstrate reasonable cause.
Failure-to-Deposit: Employers may qualify for relief if timely deposits were missed due to reasonable cause or may be eligible for first-time abatement.
Underpayment of Estimated Tax: Relief may be granted in certain situations if insufficient estimated tax payments were made.
Dishonored Check: Penalties may be removed if the payment was rejected due to reasonable cause.
If this is your first penalty and you have a clean record with the IRS, first-time penalty abatement is usually the most effective option.
Submit your penalty relief request within three years of filing your return or within two years of paying the penalty, whichever comes first.
First-Time Penalty Abatement: Call the IRS or wait until taxes are paid in full and then submit Form 843, Claim for Refund and Request for Abatement. Note that FTA applies to one tax year only.
Reasonable Cause Relief: File Form 843 with supporting evidence such as medical records, disaster documentation, or a detailed explanation of circumstances preventing timely filing or payment.
Statutory Exception: Submit Form 843 and include documentation such as IRS correspondence or written guidance relied upon.
Follow up with the IRS to ensure your request is received and recorded properly.
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