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IRS Penalty Abatement: How to Get IRS Penalties Removed

Published October 2026 | By Ray Chowdhury, CPA & CTRC

Penalties can make up a large part of an IRS balance. The late-filing penalty alone can reach 25% of the unpaid tax, and the late-payment penalty can add up to 25% more over time, plus interest. Many people pay these penalties without knowing they could have been removed. Here’s how penalty relief works, including a major change the IRS began in 2026.

The penalties that can be removed

See what happens if you file late for how these add up.

Route 1: The new Automatic Exemption from Penalty (AEP)

Starting summer 2026, the IRS is replacing much of First-Time Abate with automatic relief:

• Applies to 2025 tax-year returns and later, and to 2026 quarterly returns and later
• If you file or pay late but filed on time and paid what you owed for the prior three years (or 12 consecutive quarters for quarterly filers), the IRS won’t assess failure-to-file, failure-to-pay, or failure-to-deposit penalties
• No request needed. You’ll get a letter saying the penalty wasn’t assessed because of your compliance history.
• Unlike FTA, the failure-to-pay penalty doesn’t keep accruing on unpaid tax.

If you get a notice showing a penalty and think you should have qualified, contact the IRS. You still owe the tax and interest.

Route 2: First-Time Abate (FTA)

FTA still applies to earlier years (and to eligible returns AEP doesn’t cover). To qualify:

• You filed the same type of return on time for the prior three years
• No penalties in those three years, other than an estimated tax penalty, or any penalties were removed for reasonable cause or IRS error
• Business taxpayers have additional deposit-history requirements

FTA isn’t automatic. You ask by calling the number on your notice or sending a written request. You don’t have to name FTA specifically; the IRS checks your history. FTA is considered before reasonable cause.

Route 3: Reasonable cause

If you don’t have a clean history, you can still get relief by showing you used ordinary business care and prudence but couldn’t comply because of circumstances beyond your control. The IRS’s examples:

• Fire, casualty, natural disaster, or civil disturbance
• Inability to obtain records
• Death, serious illness, or incapacitation of you or an immediate family member
• System issues that delayed an electronic filing or payment

What the IRS looks at: the dates, how the event actually prevented you from complying, what else you were able to do during that time, and how quickly you got back into compliance afterward.

What to include: a clear timeline and supporting documents, such as hospital or court records, a doctor’s letter with dates, a death certificate, insurance or fire reports, or proof of a disaster declaration.

What usually doesn’t work

• “I didn’t have the money” (by itself)
• Relying on someone else to file, without more
• Forgetting or being busy
• Lack of knowledge of the rules, by itself

Penalty relief as part of a bigger plan

Removing penalties lowers the balance before you set up a payment plan or offer in compromise. It’s often the first step in a tax resolution case. Payroll tax penalties for businesses can be especially large; see payroll basics.

If the IRS says no

A denied request isn’t necessarily the end. You can generally appeal, or submit additional documentation. A professional who knows how the IRS evaluates these requests can make a big difference.

Frequently asked questions

What is First-Time Abate?

An IRS administrative waiver of failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers who timely filed the same type of return for the prior three years and had no penalties (other than an estimated tax penalty) in that period, or had penalties that were removed for reasonable cause or IRS error.

What is the Automatic Exemption from Penalty?

A new IRS relief starting summer 2026. For 2025 tax-year returns and later (and 2026 quarterly returns and later), if you file or pay late but have a clean three-year compliance history, the IRS won’t assess the penalty at all and will send you a letter explaining that.

Does penalty abatement remove interest?

Interest on the underlying tax generally stays. But the IRS automatically reduces or removes the interest charged on a penalty when the penalty is reduced or removed.