Why this matters
Identity-theft-related penalties — such as failure-to-file, failure-to-pay, or accuracy-related penalties — can leave victims owing fines and interest for tax years they did not cause. The IRS can abate those penalties when taxpayers substantiate that identity theft, not taxpayer conduct, caused the issue (IRS Identity Theft Central: https://www.irs.gov/identity-theft-central).

Step-by-step: What to request and how to ask

  1. Register the identity-theft case with the IRS. File Form 14039, Identity Theft Affidavit, if you haven’t already, and follow instructions on IRS Identity Theft Central. Keep a copy of the filed form and any IRS confirmation letters. (Form 14039: https://www.irs.gov/forms-pubs/about-form-14039)

  2. Request penalty abatement for specific penalties and tax years. Send a written request (or respond to the IRS notice) that: identifies the penalty type and tax year, states the issue was caused by identity theft, and requests “abatement for reasonable cause due to identity theft.” Include copies (not originals) of supporting documents.

  3. Ask for a corrected account transcript and closure of the fraud marker. Request that the IRS correct your account transcripts so falsely reported income or duplicate filings are removed and that a fraud indicator is added to prevent future misuse.

  4. If the IRS doesn’t act or delays create financial hardship, ask the Taxpayer Advocate Service (TAS) to intervene. TAS helps taxpayers who face economic harm or who can’t resolve issues through normal IRS channels (Taxpayer Advocate Service: https://taxpayeradvocate.irs.gov/).

Documents to include (typical and persuasive)

  • Form 14039 (Identity Theft Affidavit) or IRS correspondence acknowledging your identity-theft case.
  • Police report or Federal Trade Commission Identity Theft Report (IdentityTheft.gov). A police report is especially persuasive if available.
  • Copies of IRS notices, penalty assessments, and the specific notice(s) you received.
  • Proof of your correct wages and income (W-2s, 1099s, employer statements) showing the IRS‑reported income is fraudulent.
  • A written statement explaining the sequence of events and dates you discovered the fraud.

Common timelines and what to expect
Processing times vary. Simple identity-theft notices can be resolved in weeks; complicated cases (fraudulent returns, multiple years) often take several months. The IRS will place an identity-theft indicator on your account while investigating, which may delay normal processing but helps prevent further fraudulent filings. Keep sending copies of requested documents and keep records of all contact.

When to escalate or ask for additional relief

  • If penalties remain after you submit documentation, request “reasonable‑cause” penalty abatement and include the same evidence. The IRS evaluates each case individually.
  • If you’ve already paid penalties, request a refund or credit once abatement is approved.
  • If the IRS does not respond in a timely manner or you suffer financial hardship (lost wages, inability to pay living expenses), contact the Taxpayer Advocate Service for help.

Practical tips from my practice

  • Document everything: I advise clients to collect police reports, FTC Identity Theft Reports, copies of all IRS notices, and communications with employers and financial institutions. A clear timeline in your statement speeds review.
  • Be specific in requests: Identify the penalty by name and the exact tax year(s). Vague requests cause delays.
  • Use certified mail or the IRS online secure portal (when available) and keep proof of delivery.

Common mistakes to avoid

  • Waiting to respond to an IRS notice. Prompt response preserves rights and speeds resolution.
  • Sending originals. Always send copies and keep organized records.
  • Assuming the IRS will automatically remove penalties. You must request abatement and provide proof.

Related resources

Authoritative sources

Disclaimer
This article is educational and does not constitute tax or legal advice. For an individualized strategy and representation, consult a qualified tax professional or attorney.