Can I get IRS penalties removed from my account?
Often, yes — and on grounds that have nothing to do with whether you can afford to pay. Relief for a clean compliance history is in transition: for recent and future periods the IRS applies Automatic Exemption from Penalty at return processing, with no request; First Time Abate, which you ask for, still covers earlier periods. Separately there is reasonable cause, and statutory exceptions such as reliance on written IRS advice. Penalties are frequently the largest single component of an aged balance, so abatement can change the size of the problem before any payment arrangement is chosen. Interest is different: it generally cannot be abated except where it resulted from IRS error or delay.
Why this is worth doing first
On an aged balance — especially one with unfiled years — penalties are often a very large share of what is owed.
The failure-to-file penalty under § 6651(a)(1) runs at 5% of the unpaid tax per month up to 25%. The failure-to-pay penalty under § 6651(a)(2) runs at 0.5% per month, also to 25%. Interest compounds on the tax and on the penalties.
Two consequences follow:
The balance may be substantially reducible without any payment arrangement at all.
Sequencing matters. Abating penalties before choosing an arrangement can move a balance below a threshold — turning a disclosure-heavy installment agreement into a simplified one, or changing the arithmetic of an Offer in Compromise.
Choosing a payment path first and looking at penalties afterwards gets this backwards.
The three grounds are genuinely different
They are not alternative arguments for the same thing. They have different requirements, different evidence, and different consequences.
| Clean compliance history | Reasonable cause | Statutory exception | |
|---|---|---|---|
| Nature | Administrative relief | Facts-and-circumstances | Specific statutory provision |
| Turns on | Clean prior compliance | What prevented compliance | A defined situation |
| Evidence | The account history itself | Dates, records, causation | The written advice or provision |
| How it arrives | Automatic, or on request — see below | Each occasion on its merits | As the provision allows |
Clean compliance history — and this is mid-change. The relief for taxpayers with a clean record is moving from a waiver you ask for to an exemption the IRS applies itself, and for now the two run alongside each other.
Automatic Exemption from Penalty (AEP). Granted at original-return processing rather than requested. Where the return qualifies, the IRS’s systems prevent the failure-to-file, failure-to-pay and failure-to-deposit penalties from being assessed at all, rather than assessing them and removing them later. No taxpayer action is required when it applies. The transition began in summer 2026 with 2025 tax-year and 2026 quarterly original returns, and AEP officially replaces First Time Abate for eligible original returns due on or after 1 January 2027.
It is not universal. It reaches a defined list of returns — including Forms 1040, 1065, 1120, 1120-S, 940, 941, 943, 944 and 945 — and the return must be filed within three years of its original due date. It prevents those three penalties; it does not touch the tax itself, and it does not touch interest.
First Time Abate (FTA). Still the route for tax year 2024 and 2025 quarterly returns and earlier. It also remains available for 2025 tax-year and 2026 quarterly returns that did not receive AEP consideration during the transition — the IRS is explicit that not every return in that window will, and that a taxpayer who receives a penalty notice may contact it to request FTA. For eligible returns due on or after 1 January 2027, FTA is no longer available.
What both turn on. The same compliance test: the same return filed for each of the three preceding years or twelve quarters (or no requirement to file), and no penalty of $1 or more assessed in that window other than an estimated tax penalty — unless one was assessed and then abated for reasonable cause or IRS error. Employment-tax returns carry additional deposit-penalty criteria. Payment is not among the conditions.
Reasonable cause. Available where the taxpayer exercised ordinary business care and prudence and was nevertheless unable to comply. Serious illness, death in the immediate family, destruction of records by fire or flood, and similar circumstances. It requires a causal link to the specific period — an illness in 2019 does not explain a 2022 return — and it is established with dates and documentation, not narrative.
Statutory exceptions. Defined provisions, including reliance on erroneous written advice from the IRS.
Where you still request First Time Abate, which year you spend it on matters
This applies to the periods FTA still covers — tax year 2024 and 2025 quarterly returns and earlier, and transition-year returns that did not receive AEP. Because the relief depends on a clean preceding period, using it on one year generally makes it unavailable for nearby years, so applying it to the first year that comes to hand rather than the year with the largest penalty can waste most of its value. Establishing the penalty composition of every period before requesting anything is what prevents that. Where AEP applies instead, there is nothing to spend: it is granted at processing and is not a choice made year by year.
Interest is not the same
Interest under § 6601 is statutory and generally not abatable on sympathy grounds, however compelling the circumstances.
The significant exception is § 6404(e): interest attributable to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act may be abated. This is narrower than it sounds — it does not cover delay inherent in the process, only unreasonable error or delay in a specific act.
Interest that accrued on an abated penalty is removed along with the penalty. That is a consequence of the abatement, not a separate remedy.
What determines your options
- The penalty composition of every period — which penalties, how much each, assessed when. This is the single most important input and it is read from transcripts.
- Compliance history for the three preceding years for each period under consideration, which governs first-time abatement availability.
- Filing compliance across all years. Relief generally requires it.
- Whether any penalty was assessed in the three preceding years, since a single penalty of $1 or more other than an estimated tax penalty defeats the compliance test, unless it was itself abated for reasonable cause or IRS error.
- Documented circumstances with dates, for reasonable cause.
- Which year to request First Time Abate for, where FTA is still the applicable relief, given it is effectively non-repeatable.
- Whether any period was assessed on a substitute return, since filing an original return may reduce both the tax and the penalties computed on it.
Possible resolution paths alongside penalty abatement
Abatement reduces the balance. It is not itself a way of dealing with what remains, so it usually sits alongside one of:
- Installment agreement — and a reduced balance may qualify for simpler treatment.
- Partial pay installment agreement.
- Currently Not Collectible.
- Offer in Compromise — where a reduced balance changes the comparison against reasonable collection potential.
- Correcting the assessment, particularly on unfiled years assessed by substitute return.
What should be investigated
- Account transcripts for every period, read specifically for the penalty composition — which penalty, what amount, what date.
- Compliance history for the three years preceding each period, to establish where the first-time waiver is available and where it is worth most.
- Filing compliance across all years.
- Whether any period was assessed on a substitute return, which usually carries the largest failure-to-file penalties.
- Documented circumstances, with dates, for any reasonable cause claim.
- Whether any interest resulted from IRS error or delay.
- The effect of abatement on which arrangement is then appropriate.
What to do now
- Establish the penalty composition of every period before requesting anything. Requesting on the wrong year spends a one-time waiver for a fraction of its value.
- Do not conflate penalties and interest. They are removed on different grounds, and interest mostly is not.
- Deal with unfiled years first, since they generate the largest failure-to-file penalties and since relief requires filing compliance.
- Abate before choosing a payment path, not after — the balance drives which paths are available.
- Document reasonable cause with dates and records, because the claim is evaluated on evidence rather than on the account of events.
Common questions
Can IRS interest be removed too?
- Generally no. Interest under Internal Revenue Code section 6601 is statutory and is not abatable merely because the circumstances were sympathetic. The main exception is section 6404(e), which permits abatement of interest attributable to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act. Separately, interest that accrued on an abated penalty comes off with the penalty itself.
What is first-time abatement and who qualifies?
- It is an administrative waiver, not a statutory right. It is generally available where the same return was timely filed for the three preceding tax years and those years carry no assessed penalty — any unreversed penalty other than an estimated tax penalty defeats it, however small, unless it was later abated for reasonable cause or IRS error — and you have filed or filed a valid extension for all currently required returns. Paying the balance is **not** a condition: the Internal Revenue Manual directs that the failure-to-pay penalty be abated under the waiver even where the tax is not paid in full. It applies to failure-to-file, failure-to-pay, and failure-to-deposit penalties. Because it can usually be used only once in a span of years, using it on the wrong year can be a costly choice.
Does reasonable cause mean I could not afford to pay?
- Not by itself. Inability to pay is generally not reasonable cause for a failure-to-file penalty, though it can be relevant to a failure-to-pay penalty depending on the circumstances. Reasonable cause turns on whether you exercised ordinary business care and prudence and were nevertheless unable to comply — serious illness, death in the immediate family, destruction of records, or similar. It is established with dates, documentation, and a causal connection to the specific period.
Primary sources
Every substantive procedural statement on this page is supported by the authority below. Where the IRS revises a threshold or a fee, the source controls and this page does not.
- Administrative penalty relief
- Penalty relief for reasonable cause
- Internal Revenue Manual 20.1.1, Introduction and Penalty Relief
- IRM Procedural Update SBSE-20-0626-0643, Automatic Exemption From Penalty Administrative Relief
- 26 U.S.C. § 6651 — Failure to file tax return or to pay tax
- 26 U.S.C. § 6404 — Abatements
- About Form 843, Claim for Refund and Request for Abatement
- 26 U.S.C. § 6601 — Interest on underpayment, nonpayment, or extensions of time for payment, of tax
Related
Resolution options
The paths that exist under federal tax law, what each requires, and what decides between them.
Unfiled returns
Substitute returns, the six-year enforcement position, lost refunds, and why filing usually lowers the balance.
Installment agreement
The tiers of payment plan, what each requires, and what defaults one.
Owing the IRS
What follows an unpaid balance, and why the amount owed is a poor guide to what to do.
Tax investigation
What a professional investigation establishes, and why choosing a resolution without it is guesswork.