IRS Penalties and Penalty Relief

When are penalties assessed by the IRS?

Taxpayers who file their taxes late, pay late, or file inaccurate returns, can face IRS penalties.  The most common penalties are failure to pay, estimated tax, failure to file, and the accuracy penalty.

How to get relief from IRS penalties?

There are five reasons that the IRS provides penalty relief, however, the two most common reasons used for penalty relief are 1) the administrative waiver for first time abatement, and 2) reasonable cause.

Administrative waiver for first time abatement

You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service’s First Time Penalty Abatement policy if the following are true:

  • You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
  • You filed all currently required returns or filed an extension of time to file.
  • You have paid, or arranged to pay, any tax due.

Reasonable Cause

Taxpayers all must exercise ordinary business care and prudence in reporting their proper tax liability.

When pleading “reasonable cause” as a basis for relief from penalties, the IRS will apply all the facts and circumstances on a case-by-case basis to determine whether a taxpayer meets the reasonable-cause and good-faith exception.

Examples of  “reasonable cause” arguments include the following:

  • Long-term illness or death
  • Natural Disaster
  • Loss of records
  • Reliance on advice
  • You used reasonable and prudent care to comply

You will be required to produce reliable documentation to substantiate your argument for a waiver of penalties based on a reasonable cause argument.

You may appeal a denial of your penalty relief

You can file an appeal if ALL the following events have occurred:

  • You received a letter that the IRS assessed a failure to file and/or failure to pay penalty to your individual or business tax account;
  • You sent a written request to the IRS asking them to remove the penalty;
  • The IRS denied your request to remove the penalty; and
  • You received a Notice of Disallowance, which gives you your appeal rights.

Is there any relief from Interest on a tax deficiency?

If you are successful in getting the penalty removed, the applicable interest on the penalties will also be removed. If an unpaid balance remains on your account, interest will continue to accrue until the account is full paid.

Experience Counts When You’re Dealing With The IRS

For over 24 years the Parker Law Firm has saved our clients over $5M in taxes and we are ready to assist you in keeping money in your wallet, too!

Call us now at 770-246-1331 or email us at