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IRS Compliance

Penalty Abatement: Legally Removing IRS Penalties

Penalties can add 25% or more to your tax bill. The IRS removes billions in penalties every year. Here is how to get yours removed.

By Darrin T. Mish, Attorney

First Time Abatement

If you have been compliant for the three years before the penalty year, the IRS will remove failure-to-file and failure-to-pay penalties as an administrative courtesy. No reasonable cause argument needed. Just ask. This can save thousands with a single phone call.

Reasonable Cause

When FTA is not available, you can argue that circumstances beyond your control prevented compliance: serious illness, natural disaster, reliance on bad professional advice, death in the family. The key is connecting the event directly to the failure and showing you acted responsibly once the impediment was removed.

The Numbers

Failure-to-file penalty: 5% per month, up to 25%. Failure-to-pay: 0.5% per month, up to 25%. On a $50,000 debt, that is up to $25,000 in penalties alone. Getting even half of that removed changes the economics of resolution significantly.

Never pay a penalty you do not have to. The IRS has procedures for removing them, and they use those procedures billions of dollars' worth every year.

This guide is general information about federal tax law as of its publication date, not legal advice for your situation.