Penalty abatement: the administrative waiver, and the harder one
Two separate routes with different tests. One depends only on a clean compliance history and is granted administratively. The other depends on what happened and why, and is argued.
THE CLOCK — TIED TO THE REFUND STATUTE WHERE A PENALTY HAS BEEN PAID
Abatement of an unpaid penalty can be requested at any time while the balance stands. Where the penalty has already been paid, getting it back is a refund claim, and refund claims have their own deadlines — generally three years from filing or two years from payment, whichever is later.
First-time abatement
This is an administrative waiver, not a statutory one, and it does not depend on anything having gone wrong. It depends on your record.
Broadly: no penalties of the same kind in the three preceding periods, every required return filed or a valid extension in place, and the tax paid or an arrangement in place to pay it. Where those hold, the failure-to-file, failure-to-pay and failure-to-deposit penalties for one period can be removed.
It is the first thing to ask about because it is the easiest to obtain, it is frequently granted on a phone call, and it does not require you to explain anything.
One point of sequence matters. The waiver is available once in a rolling window, so where several periods carry penalties it is worth applying it to the period with the largest penalty rather than the earliest — and where a reasonable cause argument would succeed on its own merits, making that argument first preserves the administrative waiver for a period that has no story behind it.
Reasonable cause
The statutory test is that the failure was due to reasonable cause and not to willful neglect: that you exercised ordinary business care and prudence and were nevertheless unable to comply.
What tends to succeed: serious illness or incapacity affecting you or an immediate family member, at the relevant time; death in the family; destruction of records by fire, flood or other casualty; an inability to obtain records despite reasonable effort; a natural disaster; and reliance on written advice from the IRS that turned out to be wrong.
What tends to fail: not having the money, which is generally not reasonable cause for a failure to pay, though the circumstances that caused it sometimes are; ignorance of a filing requirement standing alone; and a preparer's failure to file, where the Supreme Court has held that the duty to file is non-delegable and reliance on an agent to meet a known deadline is not reasonable cause. Reliance on professional advice about a substantive question of law is a different matter and can support relief.
A request is only as good as its dates. It has to connect a specific event to a specific period and show why compliance was not possible then and was resumed once it was — with medical records, death certificates, insurance claims or whatever documents the events produced.
WHAT A REASONABLE CAUSE REQUEST MUST SHOW
- What happened, and precisely when, against the periods in question
- Why it prevented compliance — not merely that it was a difficult time
- That compliance resumed as soon as the circumstance was resolved
- What ordinary care was being exercised before it happened
- Documents: medical records, death certificates, insurance or casualty claims, correspondence
Requests that describe a hard period without connecting it to specific dates and specific returns are the most common reason this route fails.
Interest is different
Interest is not a penalty. It is the cost of money the government was owed and did not have, it runs by statute, and the IRS has very little discretion over it.
It can be abated where an unreasonable error or delay by an IRS officer in performing a ministerial or managerial act caused it — a case sitting untouched in a queue, for instance. That is a narrow ground and it requires identifying the delay.
Interest that accrued on a penalty follows the penalty: abate the penalty and the interest on it goes too. Interest on the underlying tax stays.
Which is a practical argument for dealing with a balance early rather than optimizing the penalty position later. Penalties are capped; interest is not.
How to ask, and what happens if refused
For a straightforward first-time waiver, a phone call to the number on the notice often resolves it. For anything requiring an explanation, write, or use Form 843 where a paid penalty is being reclaimed.
Address each period and each penalty separately. A single letter about several periods invites a single answer, and a partial refusal is harder to unpick than a set of separate decisions.
A refusal can be appealed to the Independent Office of Appeals, and penalty appeals succeed reasonably often, because the question is a judgment about facts rather than a computation. The appeal has a deadline stated on the letter that refused it.
Where this comes from
The statutes behind this page, so you can check any of it rather than take it on trust.
- IRC §6651(a)(1)
- Failure to file: 5 percent of the unpaid tax per month or part month, to a maximum of 25 percent, with a minimum amount where a return is more than 60 days late.
- IRC §6651(a)(2)
- Failure to pay: 0.5 percent per month or part month, to a maximum of 25 percent.
- IRC §6651(a)
- Both are excused where the failure is due to reasonable cause and not to willful neglect.
- IRC §6656
- Failure to deposit employment taxes — a tiered penalty rising with lateness.
- IRC §6662
- Accuracy-related penalty of 20 percent. Not covered by the first-time waiver.
- IRC §6404(e)
- Interest abatement where an unreasonable error or delay by an IRS officer in performing a ministerial or managerial act caused it.
This page explains what the IRS or the Massachusetts Department of Revenue does and cites the statute. It is not advice about your situation, which depends on facts none of this knows. Tell us what your letter says and what date is on it. Please do not send Social Security numbers or tax documents through the form.
Notice CP14
The first balance-due notice the IRS sends. It is a bill, not an enforcement action — and it is the point at which the widest set of options is still open.
Unfiled tax returns
Almost every serious collection case has unfiled periods behind it. Nothing else can be resolved until they are in — and the returns the IRS prepares in your place are, by design, the worst possible version of your tax position.
Payroll tax debt
Part of every payroll deposit is money withheld from employees and held in trust. That is why the IRS pursues these balances harder and faster than any other, and why they can become personal.
Installment agreement
A monthly payment plan under section 6159. Below certain balances it is close to automatic and requires no financial disclosure at all; above them it becomes a negotiation about what you can afford.
Questions about penalty abatement.
- Which penalties can first-time abatement remove?
- Failure to file, failure to pay and failure to deposit. It does not cover the accuracy-related penalty, the fraud penalty, or penalties arising from an examination adjustment.
- Does not being able to afford it count as reasonable cause?
- Generally not for a failure to pay, on its own. The circumstances that caused the inability sometimes do — a sudden illness, a casualty, an event outside your control — which is why the request should describe the cause rather than the shortage.
- My accountant did not file the return. Is that reasonable cause?
- For a missed filing deadline, generally no. The Supreme Court has held that the duty to file by a known date cannot be delegated. Reliance on professional advice about a substantive legal question is treated differently and can support relief.
- Can I get interest removed?
- Only in narrow circumstances, principally where an unreasonable IRS error or delay in a ministerial or managerial act caused it. Interest that accrued on an abated penalty is removed with the penalty.
- I already paid the penalty. Is it too late?
- No, but it becomes a refund claim rather than an abatement request, and refund claims have deadlines — broadly three years from filing or two years from payment, whichever is later. Form 843 is the instrument.
- Should I ask for first-time abatement or argue reasonable cause?
- Where a genuine reasonable cause argument exists, make it first. The administrative waiver is available once in a rolling window, and spending it on a period that had a real explanation wastes it.
Tell us what the letter says and what date is on it.
Scope and price in writing before anything starts. Where what you need is something we do not do, you will be told that instead.
Please don't send Social Security numbers or tax documents through this form.