Penalty Abatement
Written in plain language for general understanding. This is educational content, not legal advice. Based on federal statutes and official sources.
What is this right?
The IRS charges penalties for late filing, late payment, and accuracy issues — but you have the right to request that penalties be removed ("abated"). If you have a good reason for the failure, such as a serious illness, natural disaster, or bad advice from a tax professional, the IRS may remove the penalty entirely.
The IRS also offers First Time Penalty Abatement (FTA) — an administrative waiver for taxpayers with a clean compliance history.
When does it apply?
This right applies when:
- The IRS assessed a penalty on your account (failure to file, failure to pay, estimated tax penalty, accuracy penalty)
- You have a reasonable cause for the failure (illness, death in family, natural disaster, fire, IRS error, bad professional advice)
- You have a clean compliance history (3 prior years of on-time filing and payment — qualifies for First Time Abatement)
Common misconceptions:
- "IRS penalties are final" — No. You have the right to request abatement for any penalty, and the IRS grants them regularly.
- "You need a lawyer to get penalties removed" — Not usually. Many penalty abatement requests can be handled with a phone call or a simple letter.
- "First Time Abatement only works once" — Technically yes, but the 3-year lookback resets. If you stay compliant for another 3 years, you can qualify again.
What should you do?
Step 1: Identify the penalty. Review your IRS notice to understand which penalty was assessed and the amount.
Step 2: Check if you qualify for First Time Abatement (FTA). You qualify if you filed on time and paid on time for the 3 prior tax years. Call the IRS at 1-800-829-1040 and simply ask for FTA.
Step 3: If FTA doesn't apply, submit a reasonable cause request in writing. Use Form 843 or write a letter explaining why you failed to file/pay, what steps you took to comply, and attach supporting documentation.
Step 4: If the IRS denies your request, you can appeal to the IRS Office of Appeals. Use Form 12203 (Request for Appeals Review).
Step 5: Interest on underpayment generally cannot be abated unless caused by IRS error or delay. But removing the penalty also stops interest from accruing on the penalty amount.
What should you NOT do?
Don't accept the penalty without asking. Many taxpayers pay penalties they could have had removed simply by asking.
Don't make vague excuses. "I was busy" or "I forgot" generally don't qualify as reasonable cause. Be specific: doctor's notes, death certificates, FEMA disaster declarations, etc.
Don't pay the penalty and assume it's over. You can request abatement even after you've already paid. The IRS will refund the penalty amount if approved.
Don't ignore the deadline. Generally, you must request abatement within 3 years of the tax return filing date or 2 years from the date you paid the penalty.
How Illinois differs from federal law
Illinois has specific provisions for penalty relief on state taxes:
- Reasonable cause abatement: IDOR may abate penalties if the taxpayer shows reasonable cause and good faith (e.g., serious illness, natural disaster, reliance on incorrect IDOR advice).
- First-time abatement: While not formally codified like the IRS program, IDOR may exercise discretion to waive penalties for taxpayers with a clean compliance history.
- Voluntary disclosure: Illinois has a voluntary disclosure program for taxpayers who haven't filed. Coming forward voluntarily can result in waiver of penalties and limitation of look-back periods.
- Amnesty programs: Illinois has periodically offered tax amnesty programs that waive penalties and reduce interest for taxpayers who come forward and pay past-due taxes.
Additional Steps in Illinois
Request penalty abatement by writing to IDOR or through MyTax Illinois at mytax.illinois.gov. Explain the reasonable cause clearly and include supporting documentation. Call (800) 732-8866 for guidance.
Relevant Law: 35 ILCS 735/3-8 (abatement of penalties), 35 ILCS 735/3-3 (penalty provisions)
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