How the IRS Decides If You Qualify for Penalty Relief
Owe penalties to the IRS? You might qualify for relief—but it depends on whether your “reason” fits their rules. This post breaks down the IRS’s decision-making process for First-Time and Reasonable Cause penalty abatement.
What Is Penalty Relief?
It’s a reduction or removal of penalties (not the tax itself). There are three main types:
First-Time Abatement (FTA) – Available if you’ve been compliant for the last 3 years
Reasonable Cause Relief – Based on circumstances outside your control
Statutory Exception – Rare, based on IRS errors or disaster relief
What Counts as “Reasonable Cause”?
Natural disasters or serious illness
Death or incapacity of key person
Unable to obtain records
Bad advice from a professional or the IRS
Bank errors (in limited cases)
What Doesn’t Count?
“I forgot”
“I was too busy”
“My tax person didn’t tell me” (without written proof)
“I didn’t have money” (unless hardship is documented)
What the IRS Looks For
Documentation – Medical records, insurance reports, letters
Timeliness – Did you act as soon as you could?
Compliance – Are your other years in good standing?
Call to Action
Not sure if your case qualifies? Use our Reasonable Cause Checklist or book a review session to evaluate your IRS narrative before you submit.
