What it is
The IRS adds penalties when a return is filed late, or the tax is paid late. Businesses can also get penalties for late payroll tax deposits. Then the IRS charges interest on top of the penalties.
Penalty abatement is the IRS’s word for taking a penalty off. It can be done for a clean history, for a good reason, or for a few other special cases. When a penalty comes off, the interest on that penalty comes off too.
First, do you owe the tax under the penalties?
Penalties are figured from the tax. So if the tax is too high, the penalties are too high. We check the whole bill first. Was a return filled in by the IRS for you? Are payments missing? Is the year too old to collect? Fixing the tax can shrink the penalties with it.
The new automatic relief, and what it doesn’t cover
Starting in summer 2026, the IRS is starting a program called the Automatic Exemption from Penalty. It covers 2025 tax returns and later. For returns filed every quarter, like payroll returns, it covers 2026 and later.
If you qualify, the IRS doesn’t charge the penalty in the first place. You don’t have to ask. You’ll get a letter explaining it. It covers penalties for filing late, paying late, and late payroll deposits.
To qualify, you generally need a clean record. That means you filed and paid on time for the 3 years before, and had no penalties. A penalty for not making estimated payments doesn’t count against you.
But it does not reach back. For 2024 and earlier, the old rule still applies. It’s called First Time Abatement, and it works much like the new program. The big difference is that you, or someone for you, has to ask. The IRS won’t do it on their own. If you have older years with penalties, there may be money sitting on the table.
How the IRS decides on a good reason
When the clean-history rule doesn’t fit, there’s reasonable cause. This means something outside your control kept you from filing or paying on time, even though you were careful.
The IRS looks at the whole story. Things that may count:
- a serious illness, or a death in the family
- a fire, a natural disaster, or other big event
- not being able to get your records
Things that usually don’t count on their own:
- not having the money
- not knowing the rules
- trusting someone else to file for you
You need to explain what happened, when, and how it kept you from filing or paying. You also need to show what you did to try. Proof matters, like hospital records with dates.
How we pursue it
We find every penalty. We pull your IRS records for every year. We list each penalty, and how much interest it added.
We pick the right kind of relief. For older years, we often start with First Time Abatement. That’s usually the simplest way. For other years, we build a reasonable cause case.
We ask in the way that works best. Some requests can be handled by phone. Others need a written request with proof. We handle both.
If they say no, we can appeal. A denial isn’t always the last word.
What to watch out for
- Don’t assume a newer year was handled. If you get a penalty bill for 2025 or later and think it should have been skipped, don’t just pay it. Ask.
- Some penalties keep growing until the tax is paid. Getting relief for the past doesn’t stop new penalties on a balance that’s still unpaid.
- Keep your record clean. Future relief depends on filing and paying on time from here on.