On Behalf of the Law Offices of Sammy Kim

Quick Summary

IRS penalties are not always final. In the right case, they may be reduced or removed through administrative relief or a reasonable-cause request. Historically, many taxpayers searched this topic as “first-time abatement.” As of summer 2026, the IRS has begun transitioning eligible original 2025 returns and future periods into an automatic relief program called Automatic Exemption from Penalty, while first-time abatement still matters for earlier periods and some transition cases. If you do not qualify for that kind of administrative relief, you may still be able to ask for penalty relief based on reasonable cause. The outcome depends on your compliance history, the tax period involved, and how well the request is documented.

Many people assume the tax, penalties, and interest on an IRS notice are one fixed block.

They are not.

The tax itself is usually the hardest part to change unless the underlying balance is wrong. Penalties are different. In some cases, they can be removed. In other cases, part of the penalty can be reduced even when the tax still has to be paid.

That distinction matters because penalties can add real weight to an already hard situation. Sometimes the fastest meaningful savings in a tax case do not come from fighting every dollar of tax. They come from removing penalties that should never have stayed on the account in the first place.

What Is IRS Penalty Abatement?

Penalty abatement means asking the IRS to remove or reduce a penalty that has been assessed or proposed.

Depending on the type of account and tax period, that relief may be based on:

administrative relief for taxpayers with a timely compliance history
reasonable cause
a statutory exception
IRS error

For most individual taxpayers and closely held businesses, the two most common paths are administrative relief and reasonable cause.

What People Mean By “First-Time Abatement”

For years, taxpayers and tax professionals used the phrase “first-time abatement” or “first-time penalty abatement” to describe the IRS’s most common administrative waiver for failure-to-file, failure-to-pay, and failure-to-deposit penalties.

The basic idea was simple: if your recent compliance history was clean enough, the IRS could remove eligible penalties without requiring you to prove a disaster-level excuse.

That concept still matters. But there is an important update in 2026.

The 2026 IRS Change: Automatic Exemption From Penalty

The IRS has now started transitioning eligible original 2025 returns and future periods into a newer relief program called Automatic Exemption from Penalty, or AEP.

Under AEP, eligible taxpayers with a timely compliance history may avoid certain penalties from being assessed in the first place on qualifying original returns. That is different from the older first-time-abatement model, where the penalty was generally assessed first and then removed only after the taxpayer requested relief.

Why does that matter?

Because taxpayers still search for “first-time abatement,” and in many real cases that language is still relevant:

earlier tax years may still need traditional first-time-abatement analysis
some transition-period returns may still require a request
many notices arriving now involve years before AEP applies cleanly

So the search term has not disappeared even though the IRS system is changing.

Who May Qualify For Administrative Penalty Relief?

Whether the relief is labeled first-time abatement or handled through the newer automatic process, the core idea is a history of timely compliance.

The IRS says this kind of relief generally looks at whether:

the same return type was timely filed for the prior three years or applicable prior quarters
no relevant penalties were assessed in that lookback period, or the penalties were later removed for acceptable reasons such as reasonable cause or IRS error
additional program-specific rules are met

For traditional first-time-abatement requests, the IRS also says taxpayers do not need to submit a stack of supporting documents just to ask for that administrative review. In many cases, the IRS can decide it from the account history.

What Penalties Are Usually Involved?

The most common penalties in these requests are:

failure to file
failure to pay
failure to deposit

Not every penalty qualifies. Accuracy-related penalties, information-return penalties, and other specialized penalties may require different arguments or may not fit this relief path at all.

That is one reason a careful account review matters before anyone promises “we can get your penalties wiped out.”

What Is Reasonable Cause?

If you do not qualify for administrative relief, reasonable cause may still be available.

The IRS describes reasonable cause in terms of ordinary business care and prudence. In plain English, the question is whether you were trying to comply but were unable to do so because of circumstances beyond your control.

That is a facts-and-documents issue.

The IRS does not grant reasonable cause because someone simply says the situation was hard. The request usually needs to show:

what prevented timely filing or payment
when the problem began
how long it affected you
what steps you took once you were able to act
why the failure was not just neglect or inattention

What Situations May Support Reasonable Cause?

There is no magic list that guarantees success, but examples that often deserve careful review include:

serious illness or hospitalization
death or serious illness affecting an immediate family member
fire, flood, or other disaster
inability to access necessary records despite genuine efforts
major business disruption outside the taxpayer’s control
a sudden financial crisis that may support reasonable cause for nonpayment in limited circumstances

The important thing is not the label. It is the proof.

A short written explanation with no dates, no records, and no story of what happened next is usually not enough.

Can You Get Penalties Removed Even If You Still Owe Tax?

Sometimes, yes.

Penalty relief and payment of the underlying tax are related but not identical questions.

For administrative relief, the IRS rules depend on the type of relief and the period involved. For reasonable cause, taxpayers may still ask for penalty relief even when the tax remains due. In many cases, the smarter path is to work both sides at once:

challenge the penalty if there is a solid reason
separately address the tax balance through a payment plan or other collection strategy

That kind of split strategy often matters more than people realize. A taxpayer may not have a good argument to erase the tax itself, but removing penalties can still make the total balance substantially easier to manage.

How Do You Ask For Penalty Relief?

The IRS says taxpayers can often start by calling the number on the notice. If the issue cannot be resolved that way, the IRS also allows written requests, including the use of Form 843 in appropriate situations.

The right approach depends on the posture of the case.

For example:

a straightforward administrative-relief request may begin with an account review and a phone call
a stronger reasonable-cause case often deserves a written submission with supporting records
a denied request may need to move into Appeals

If the IRS rejects your request to remove a penalty, you may still be able to request review through the IRS Independent Office of Appeals.

Why Penalty Relief Requests Fail

The most common reasons are not mysterious.

They usually fail because:

the taxpayer asked for the wrong type of relief
the lookback history does not actually qualify
the explanation is vague
the records do not support the timeline
the request focuses on fairness instead of the actual IRS standard

That last point matters.

The IRS does not remove penalties just because the result feels harsh. The request has to fit the rule being invoked.

When Penalty Abatement Can Matter Most

Penalty relief often has the biggest practical value when:

the tax debt is real, but the penalties make repayment much harder
the taxpayer has otherwise been compliant for years
the case involves a one-year breakdown rather than a long pattern
the account is moving toward collection and balance reduction would materially help

If the larger issue is that the tax debt itself is no longer manageable, penalty relief may need to be paired with a bigger strategy. That can include a payment arrangement, another collection-resolution option, or a full review of the account before any settlement talk begins.

For taxpayers already dealing with a broader IRS balance problem, Sammy’s page on IRS tax problems is a useful starting point. If the debt has already disrupted your ability to stay current, the related article on what to do if you receive an IRS audit letter may also help frame how balances grow after the IRS makes an adjustment.

When To Get Help

You should consider legal help if:

the penalties are large enough to change the whole case
you are not sure whether the account fits administrative relief or reasonable cause
the IRS already denied one request
the penalty issue overlaps with an audit, payroll tax matter, or multiple tax years

I represent clients nationwide in federal tax matters, with my office based in Fairfax, Virginia. In penalty cases, the goal is usually not theatrical. It is to identify the best relief theory, support it properly, and reduce the part of the balance that may actually be removable.

Talk to a tax expert now. Book a consultation at vataxattorney.com or call (703) 202-1005.

IRS Penalty Abatement: How First-Time Abatement and Reasonable Cause Can Reduce Your Tax Bill