Overview
When First‑Time Abatement (FTA) isn’t available, taxpayers still have multiple paths to seek relief from penalties the IRS assessed for late filing, late payment, employment tax deposits, or other compliance failures. These alternatives include reasonable‑cause abatements, statutory exceptions, administrative waivers, and, in limited circumstances, appeals or collection‑related relief. Each path has distinct standards and evidence requirements. This article explains the main options, what the IRS looks for, how to present your case, and practical tips from my experience working with taxpayers.
Key penalty relief options explained
1) Reasonable‑cause abatement
What it is: The IRS may abate penalties if the taxpayer can show reasonable cause — that circumstances beyond their control prevented timely filing or payment and they acted responsibly under the circumstances.
What the IRS considers: The IRS uses a facts‑and‑circumstances test (see IRS guidance on penalty relief) and typically looks for events such as serious illness or death, natural disasters, theft, unavoidable absence, or inability to obtain records. Reliance on erroneous written advice from the IRS or a tax professional can also qualify in some cases (IRS, Reasonable Cause guidance).
Evidence to provide: medical records, death certificates, insurance or police reports, correspondence showing attempts to comply, unemployment notices, bills, proof you tried to obtain records, or written advice you relied upon.
How to request: Submit a written statement or use the IRS online account message/correspondence channels where available, identify the penalty, tax period, and include supporting documents. For many employees and small businesses, calling the IRS and requesting a reasonable‑cause review is a reasonable first step followed by a written confirmation. In certain penalty types (e.g., employment taxes), required forms differ; review the IRS penalty guidance.
Practical note from my practice: Detailed, contemporaneous documentation is the single most important factor. In cases where taxpayers had job loss accompanied by a medical emergency, a short timeline with supporting documents produced a successful outcome far more often than a vague explanation.
2) Statutory exceptions and disaster relief
What it is: Congress and Treasury sometimes create specific exceptions that remove or postpone penalties under defined statutory conditions. A common example is disaster relief (IRS Section 7508 administrative relief) that extends filing and payment deadlines for taxpayers affected by federally declared disasters.
Examples: Presidentially or IRS‑declared disaster relief, certain exceptions for victims of identity theft, and other narrowly tailored statutory provisions.
How to use it: Check IRS disaster relief announcements (IRS disaster relief page) and verify the affected tax periods. If you are in an area with declared relief, the IRS typically applies the relief automatically for affected taxpayers, but you may need to reference the disaster in correspondence for non‑automatic treatments.
3) Administrative waivers and IRS discretion
What it is: The IRS may exercise administrative discretion to waive penalties in special or unusual cases, sometimes under internal programs or case‑by‑case reviews.
When it applies: Examples include IRS errors, cases where the law is ambiguous, or where administrative policy supports equity considerations. Certain collections or lien‑related penalties may be negotiated or adjusted through Collections or Appeals.
How to request: Provide a detailed written request to the IRS, including why administrative relief is appropriate and the documents supporting that request. Engage the IRS Collections or Appeals office when penalties relate to collection actions.
4) Abatement for math or clerical errors and correction procedures
What it is: If penalties arise from IRS computational mistakes or clerical issues—such as incorrect credits applied—the IRS may correct the account without a traditional abatement request.
How to proceed: If you believe the penalty or assessed tax is wrong because of an IRS error, call the IRS or submit supporting documentation and ask for an account review. For return corrections, consider amended returns or the specific adjustment forms (e.g., Form 941‑X for payroll tax corrections).
5) Appeals and administrative review
If the IRS denies relief, you can appeal. The IRS Office of Appeals (now the Independent Office of Appeals) reviews cases independently of the compliance functions. File a formal protest for collection due process or follow the denial instructions in the IRS letter to request Appeals consideration. The Taxpayer Advocate Service (TAS) is another independent resource for taxpayers facing hardship or systemic delays (Taxpayer Advocate Service resources).
Step‑by‑step: How to prepare and submit a strong penalty relief request
- Identify the penalty type and exact tax period from the IRS notice.
- Review whether FTA applies (if you have a clean 3‑year penalty history, FTA might still be possible). See our glossary entry on First‑Time Penalty Abatement Relief.
- Choose the best relief type (reasonable cause, statutory exception, administrative waiver) and gather supporting evidence.
- Draft a concise explanation: timeline of events, why compliance was impossible, steps taken to comply, and why the situation meets the IRS standard.
- Attach documents: medical records, death certificate, disaster declarations, unemployment notices, bank statements, insurance or police reports, and correspondence with tax preparers.
- Submit the request: written letter, correspondence channels in your IRS online account, or in some cases a specific form (review the IRS penalty guidance and our article on How to Request Penalty Abatement: Evidence, Forms, and Timing).
- Follow up: Note dates of IRS calls, the names of representatives, and any confirmation numbers.
Documentation checklist
- IRS notice number and tax period(s)
- Full name, SSN/EIN, mailing address, and daytime phone
- Clear timeline of events
- Third‑party records (medical, legal, insurance, police)
- Financial records showing inability to pay (if relevant)
- Correspondence with preparers or the IRS
- Any government disaster declaration or identity‑theft reports
Typical timelines and response expectations
Processing times vary. Informal reviews can take 30–60 days; more complex cases, Appeals, or TAS cases can take several months. Keep your account current where possible (set up payment plans if needed) while your request is pending to avoid additional penalties and interest.
When relief is unlikely or unavailable
- Repeated negligence or intentional disregard of rules (e.g., fraud) is rarely excused.
- Accuracy‑related penalties tied to tax shelter transactions are often harder to remove.
- Interest on late payments is not abatable — penalties may be waived, but interest generally continues until tax is paid.
Common mistakes to avoid
- Providing only a vague apology without evidence.
- Missing deadlines for filing appeals or additional documentation.
- Assuming the IRS will automatically remove penalties without a proper request (FTA is limited; other relief typically requires a written case).
- Failing to keep records that would prove the timeline and severity of your circumstances.
Practical strategies from my practice
- Start gathering documentation immediately. Records compiled at or near the event are far more convincing than memories written months later.
- If you have multiple years or multiple penalties, address each penalty separately in the request but include a summary showing the full context.
- Consider working with a tax practitioner for complex employment tax penalties, significant dollar amounts, or cases heading to Appeals.
- Where collection is ongoing, request penalty abatement and a collection alternative (installment agreement or Offer in Compromise) to reduce financial strain.
When to involve the Taxpayer Advocate Service (TAS)
Contact TAS if you’ve tried the normal channels, your case is causing financial hardship, or IRS delays are unreasonable. TAS is an independent organization that can help expedite or mediate problem cases (Taxpayer Advocate Service).
Additional resources and links
- IRS — Penalty Relief and Reasonable Cause: https://www.irs.gov/individuals/penalty-relief
- Taxpayer Advocate Service: https://www.taxpayeradvocate.irs.gov/
- FinHelp resources: First‑Time Penalty Abatement Relief, How to Request Penalty Abatement: Evidence, Forms, and Timing, Reasonable Cause for Penalty Abatement
Frequently asked practical questions
- Can penalty relief erase interest? No. Interest accrues on unpaid tax; abating penalties typically does not remove interest already charged.
- Will asking for relief delay collection? It depends. Some relief requests pause aggressive collection actions, but you should also request collection alternatives and keep communication open.
- How often are requests successful? Success depends on documentation and the nature of the event; reasonable cause claims with strong evidence and clear timelines have materially higher approval rates.
Final guidance and disclaimer
Penalty relief beyond FTA is available, but it requires a clear, well‑documented case. If you are unsure where to start, consult a qualified tax professional — in my practice, well‑organized documentation plus a concise legal and factual narrative makes the difference between denial and success.
This article is educational and does not substitute for personalized tax advice. Rules and IRS procedures can change; consult the IRS guidance and a tax professional for decisions that affect you.
