Can You Get IRS Penalties Removed? A Guide to IRS Penalty Abatement

Published on October 16, 2026 by Frances Tomes

Yes. IRS penalty abatement may remove certain penalties if you have a strong record of filing and paying on time, if circumstances beyond your control kept you from meeting a deadline, or if the penalty was charged in error. In 2026, the IRS also began moving to a new automatic relief program for some taxpayers. But there is no single rule that removes every penalty.

If an IRS letter shows a balance that keeps growing, take a closer look. Part of the bill may be the original tax. Another part may be penalties and interest. Before you agree to pay everything the IRS says you owe, it is worth checking whether any penalties can be reduced or removed.

What is IRS penalty abatement?

IRS penalty abatement is the removal or reduction of a penalty the IRS has charged. It is not the same as forgiveness of the tax itself. For example, a taxpayer may still owe the tax from a late return even if the IRS removes the late-filing penalty.

The first step is to identify the exact penalty, the tax year, and why the IRS charged it. Different rules apply to different penalties.

Which IRS penalties can be removed?

Common penalties that may qualify for certain kinds of relief include failure to file a return, failure to pay a tax shown on a return, and failure to make required business tax deposits. Some accuracy-related penalties may also be removed when the taxpayer had reasonable cause and acted in good faith.

Other penalties have different rules. For example, the ordinary reasonable-cause rules do not apply to the estimated-tax underpayment penalty. Do not assume that a late-payment penalty, a payroll-tax penalty, and an audit penalty can all be challenged the same way.

What changed in 2026 for IRS penalty abatement?

This is important if you recently received an IRS notice. In July 2026, the IRS described a new program called Automatic Exemption from Penalty, or AEP. It is replacing the older First Time Abate system for eligible returns as the IRS completes the transition.

For certain original returns starting with tax year 2025, and certain quarterly returns starting in 2026, the IRS may automatically avoid charging a failure-to-file, failure-to-pay, or failure-to-deposit penalty when its records show a good compliance history. In general, the IRS reviews the prior three years, or 12 quarters for quarterly filers. Not every type of tax return qualifies.

The IRS says that some taxpayers who should qualify may still receive a penalty notice during this changeover. If that happens, the notice should be reviewed rather than simply paid. First Time Abate may still be requested for older periods and for eligible transition cases. The IRS says the new system replaces First Time Abate for eligible returns with original due dates on or after January 1, 2027.

Read the IRS explanation of this 2026 change: Automatic Exemption from Penalty and First Time Abate.

Can you qualify for IRS penalty abatement because of reasonable cause?

Possibly. Reasonable cause means that you took sensible steps to follow the tax rules but still could not file or pay on time because of the circumstances. The IRS looks at the whole situation, not just one sentence in a request letter.

Examples that may support relief include a serious illness, a death in the immediate family, a fire or disaster, or records that could not be obtained despite reasonable efforts. A taxpayer who relied on a professional must show more than the fact that the professional made a mistake. Simply saying, “I did not have the money,” is usually not enough by itself.

A good request explains what happened, when it happened, how the event affected the deadline, what the taxpayer did to try to comply, and when the problem was corrected. Records can make a difference. Depending on the issue, those might include hospital records, correspondence, payment confirmations, or documents showing efforts to get missing information.

What counts as reasonable cause for IRS penalty abatement?

The IRS reviews the reason for the problem, how long it lasted, and what you did to comply. Serious illness or death in the immediate family, a natural disaster, the loss of important records, or circumstances beyond your control may help establish reasonable cause. But these events do not automatically qualify you. You must show that you exercised ordinary business care and prudence and still could not meet the obligation.

Explain the dates and the steps you took. Helpful evidence might include hospital records, insurance or disaster reports, correspondence requesting missing records, and proof that you corrected the problem promptly. The facts must connect directly to the missed filing or payment requirement.

Is not having enough money reasonable cause?

Usually not. Simply saying “I could not afford to pay” is not enough to remove an IRS failure-to-pay penalty. A business slowdown, household bills, or a tax debt larger than your savings does not automatically establish reasonable cause.

Unusual circumstances may change the analysis. For example, if a serious illness or other unexpected event affected your ability to pay, the IRS may examine the full history, what funds were available, and what steps you took. You should not assume that financial hardship alone will excuse late payment. A payment plan or Currently Not Collectible status may be a more appropriate way to address the underlying tax debt.

Can reliance on a financial adviser or tax preparer justify penalty relief?

Sometimes, especially when the issue is an accuracy-related penalty from an audit. The IRS looks at whether the taxpayer acted in good faith, provided complete and accurate information, relied on competent advice, and reasonably tried to report the correct amount of tax. Hiring a preparer does not automatically excuse a late filing, late payment, or incorrect return.

How Tomes Law Firm challenged Maria’s accuracy-related penalty

Maria relied on advice from her financial planner and tax preparer when reporting income. The IRS later assessed an accuracy-related penalty for underreporting. We believed the penalty could be challenged, and the matter went to the United States Tax Court.

In our legal brief, we cited Elaine v. Commissioner, T.C. Memo. 2017-3, and Dabney v. Commissioner, T.C. Memo. 2014-108, to support our argument that reasonable cause and good faith can defeat an accuracy-related penalty in the right circumstances. We succeeded in having Maria’s penalty removed.

Here is the important distinction: removing an accuracy-related penalty does not automatically erase the additional tax. In Elaine and Dabney, the taxpayers remained liable for the underlying tax issue, but the Tax Court did not sustain the accuracy-related penalty. Tax and penalties are separate questions, and each requires its own review.

Why should an attorney review an IRS penalty?

A successful request depends on the type of penalty, the facts, and the law. At Tomes Law Firm, we review the tax years, notices, filing history, and supporting evidence before choosing a strategy. Some taxpayers qualify for automatic relief. Others need a documented reasonable-cause submission, an administrative appeal, or a legal challenge. We do not submit a request merely because someone wants a penalty removed; we look for a valid basis to ask.

How do you request IRS penalty abatement?

Read the IRS notice and identify the penalty and tax period. Confirm that the amount was actually assessed and not charged by mistake.
Review prior filing and payment history. Check whether automatic relief, First Time Abate, reasonable cause, or a specific legal exception may apply.
Gather the facts and supporting records. Explain the timeline clearly and keep copies of everything submitted.
Contact the IRS using the number on the notice. Some requests can be handled by phone. Others require a written request or Form 843, Claim for Refund and Request for Abatement.
Track the decision and any deadline. If relief is denied, you may have the right to appeal, often within 30 days of the IRS rejection letter. Follow the deadline on your actual notice.

Do not assume that sending a penalty request stops collection action. If you cannot pay the underlying tax, you may also need a separate plan to address the balance while the request is pending.

If the IRS removes a penalty, does it remove interest too?

The IRS generally reduces or removes the interest that was charged on a penalty it removes. But interest on the unpaid tax normally stays. Separate relief from tax interest is limited and may depend on certain IRS errors or delays. Penalty relief is not the same as wiping out the whole bill.

Can New Jersey remove state tax penalties too?

Yes, sometimes. The New Jersey Division of Taxation has its own penalty-waiver process. If you have New Jersey income tax, sales tax, employer withholding, or other state tax problems, you should review the state penalties separately from the IRS penalties.

New Jersey says it may waive some late-filing or late-payment penalties for reasonable cause. For a late-payment waiver, the Division looks for undue hardship. It may consider your past filing history and the type of tax involved. The state generally cannot waive statutory interest on the underlying tax, collection fees, or post-amnesty penalties.

New Jersey generally requires a penalty to be billed before abatement is granted. The request should include a written explanation with a signed declaration under penalties of perjury, or the Division’s Abatement Request Form. A federal IRS penalty waiver does not automatically remove a New Jersey penalty.

See the New Jersey Division of Taxation penalty-abatement instructions for the state process.

Should you request penalty relief before setting up an IRS payment plan?

You should consider penalty relief as part of the full tax resolution plan, but you should not ignore a tax bill while deciding what to do. Filing missing returns and paying what you can may help limit new charges. If you need more time, you may have options such as an installment agreement or, in appropriate cases, other IRS collection relief.

At Tomes Law Firm, our approach is to look at the entire account: the original tax, penalties, interest, collection deadlines, and the taxpayer’s ability to pay. A penalty request may be useful, but it must fit the larger plan. Learn more about our New Jersey tax resolution services.

Frequently asked questions about IRS penalty abatement

Can the IRS remove penalties if this is my first late return?

Maybe. A history of timely compliance can help. The new automatic program and the older First Time Abate rules each have eligibility requirements. One late return does not always mean a penalty will be removed.

Does hiring an accountant excuse a late return?

Usually not by itself. The IRS generally expects you to take reasonable steps to make sure your return and payment are handled on time. Special facts may change the result.

Can I ask for relief if I have not paid the tax yet?

You can ask about relief, but the best timing depends on the penalty and the account. Unpaid tax may keep generating interest and, in some situations, more penalties. Do not delay addressing collection.

Can the IRS remove a penalty even if I still owe the tax?

Yes. Penalty relief and the underlying tax debt are separate. A taxpayer may still owe tax and interest on that tax after a penalty is removed. Maria’s case is an example of successfully challenging the penalty without claiming that the underlying tax automatically disappears.

Can I get penalty relief because I could not afford to pay?

Lack of funds by itself generally does not establish reasonable cause. The IRS considers whether unusual circumstances prevented payment despite reasonable efforts to comply.

Can I appeal if the IRS rejects my request?

Often, yes. A rejection letter may provide appeal rights and a short deadline, generally 30 days. Save the letter and act promptly.

Does New Jersey use the same IRS penalty rules?

No. New Jersey has its own standards and filing process. You may need separate requests to the IRS and the New Jersey Division of Taxation.

Need help with IRS penalties in New Jersey?

If the IRS or New Jersey is charging penalties that are making your tax debt harder to manage, do not assume every dollar on the notice is unavoidable. A careful review can show which charges may be challenged and what needs to happen next.

Tomes Law Firm, PC helps New Jersey individuals and small business owners with IRS and state tax problems. Call the tax resolution attorneys and accountants at Tomes Law Firm at 732-333-0681 or 833-4IRS-TAX or contact our New Jersey tax resolution team to schedule a confidential free consultation.

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