IRS penalties and interest can add up quickly, especially when tax debt has been unresolved for a period of time. In some cases, the IRS may remove or reduce certain penalties, but the available options depend on the taxpayer’s history, the type of penalty, and the facts surrounding the situation.
Reader Question
I’ve been getting aggressive collection notices from the IRS recently. I think I can pay the tax due, but I would like the penalties and interest charges reviewed. Does the IRS waive penalties? What can I do to get these removed from my account?
Does the IRS Waive Penalties?
Yes, the IRS may waive or reduce certain penalties when a taxpayer qualifies for penalty relief. Two common forms of penalty relief are First Time Penalty Abatement and Reasonable Cause penalty relief.
First Time Penalty Abatement
First Time Penalty Abatement, often called FTA, may be available when a taxpayer has a good compliance history. In general, this means the taxpayer has filed required returns, paid or arranged to pay any tax due, and has not had certain penalties in the prior three years.
This type of relief does not usually require a detailed explanation of illness, hardship, or other circumstances. In some cases, it may be requested by phone, although the IRS may also consider written requests depending on the situation.
Reasonable Cause Penalty Relief
Reasonable Cause penalty relief is different. It usually requires a stronger explanation and supporting documentation. The IRS looks at the specific facts and circumstances to determine whether the taxpayer exercised ordinary business care and prudence but was still unable to meet the tax obligation.
Examples may include serious illness, death in the immediate family, unavoidable absence, natural disaster, inability to obtain records, or other circumstances beyond the taxpayer’s control. Documentation is important, and the request often needs to explain what happened, when it happened, how it affected compliance, and what steps were taken to correct the issue.
What About Interest?
Interest is different from penalties. The IRS generally charges interest on unpaid tax and penalties until the balance is paid. In many cases, interest is not separately waived simply because it feels excessive. However, if a penalty is removed, the interest related to that penalty may also be reduced.
What Should You Do Next?
If you are receiving IRS collection notices and believe penalties may be incorrect or unfair, the first step is to review the tax years involved, the type of penalties assessed, your filing and payment history, and whether any facts support a request for relief.
TR360 helps taxpayers review IRS notices, evaluate whether penalty relief may be available, and determine what information may be needed before making a request to the IRS.