5 Straightforward Ways to Reduce or Eliminate IRS Penalties

The IRS penalty relief process can be complex, but the core programs are publicly available and clearly defined. If you take the time to understand the rules—and provide the right documentation—you may qualify to reduce or completely remove penalties that have been added to your account.

1. First Time Penalty Abatement First Time Penalty Abatement (FTA) is one of the most common ways to remove IRS penalties. It’s designed for taxpayers who’ve generally stayed compliant but made a one-time mistake, like missing a filing deadline or payment.

Who Qualifies

You may be eligible if:

   – You had no significant penalties in the past 3 years

   – All required tax returns are filed

   – You’ve paid or arranged to pay any tax owed

   FTA applies to penalties for:

   – Late filing

   – Late payment

   – Failure to deposit payroll taxes

2. Reasonable Cause Relief - If your failure to file or pay taxes was due to circumstances beyond your control, the IRS may remove penalties under Reasonable Cause Relief. This option is available when you can show that you exercised ordinary care but still couldn’t meet your tax obligations.

When it applies

You may qualify if you missed deadlines because of:

  • A serious illness, injury, or death in the family

  • Natural disasters or fires

  • Inability to access records

  • Incorrect advice from a qualified tax professional

The IRS considers each case individually, based on the facts and your compliance history.

3. Statutory Exception A Statutory Exception applies when the IRS imposes a penalty based on its own error, incorrect advice, or procedural mistake. This relief is available when you can show that you followed IRS instructions in good faith but were penalized for inaccurate or misleading guidance.

When it applies

You may qualify for a statutory exception if:

  • You received written advice from the IRS that turned out to be incorrect

  • The IRS sent conflicting notices or failed to process your return properly

  • A penalty was caused by IRS administrative or system errors

You must provide proof that you relied on the IRS’s guidance or were directly affected by their error.

4. Administrative Waivers - An Administrative Waiver is a form of penalty relief the IRS may grant under special circumstances, often tied to policy changes or systemwide issues. These waivers are initiated by the IRS and typically apply to a broad group of taxpayers without requiring individual hardship explanations.

When it applies

Administrative waivers are generally available when:

  • The IRS announces relief due to systemic processing issues

  • There is a change in IRS policy or tax law that affects how penalties are applied

  • The IRS offers automatic relief for a specific period or event (e.g., post-COVID penalty forgiveness for 2019-2020)

5. Disaster or Special Circumstance Relief The IRS may provide penalty relief to individuals and businesses affected by federally declared disasters, public emergencies, or other large-scale events. This type of relief is offered under IRS disaster relief guidelines and applies automatically or upon request, depending on the situation.

When it applies

You may qualify for disaster-related penalty relief if:

  • You live or operate in a federally declared disaster area

  • The IRS issues a notice delaying tax deadlines in your area

  • You experienced a hardship caused by events like hurricanes, wildfires, floods, or COVID-19

The IRS typically grants automatic extensions for filing and payment and may remove penalties for those who comply within the extended period.

Conclusion

IRS penalties can add up quickly, but they aren’t always permanent. Whether you made a one-time mistake, faced unexpected hardship, or were affected by an IRS error, several legitimate options exist to help reduce or eliminate the penalties applied to your tax account.

From First Time Penalty Abatement to Reasonable Cause Relief, the IRS has formal processes in place to provide taxpayers with a fair opportunity to get back on track. While these programs are publicly available, applying them effectively—and avoiding mistakes that could lead to denial—often requires professional insight.

If you’re unsure where to start or want help building a strong request, contact us now.