Abatement of Tax Penalties

For the 2012 tax year the IRS assessed 37 million penalties against taxpayers, and abated or forgave about 5 million of those penalties. The IRS is willing to forgive your tax penalties if you acted with reasonable cause and good faith. The determination of whether a taxpayer acted with reasonable cause and in good faith is made on a case-by-case basis, taking into account all pertinent facts and circumstances.  Generally, the most important factor is the extent of the taxpayer’s effort to assess the his or her proper tax liability. Circumstances that may indicate reasonable cause and good faith include an honest misunderstanding of fact or law that is reasonable in light of all of the facts and circumstances, including the experience, knowledge, and education of the taxpayer.  A further circumstance indicating reasonable cause and good faith is reasonable reliance on the advice of a tax professional.

First Time Abatement of Tax Penalties

The IRS also offers a generous, but little known, program that allows a first time abatement of your tax penalties. The first time abatement (FTA) is available to individual taxpayers for failure-to-file and failure-to-pay penalties. The FTA is available to business and payroll taxpayers for failure-to-file, failure-to-pay, and failure-to-deposit penalties. To be eligible for the FTA, you must demonstrate the following four things:

  1. Filing compliance;
  2. Payment compliance by fully paying tax due or by arranging to pay the full tax due;
  3. Not have an outstanding request for a tax return from the IRS; and
  4. Have a three-year clean penalty history.


You have options when it comes to reducing or eliminating your penalties. Usually penalty reduction will be  a part of a comprehensive tax relief solution that we help you with. Call us for help abating your tax penalties at (408) 459-8427.