Yes, you can get IRS penalty relief after you file late, if you qualify for IRS First-Time Penalty Abatement (FTA), reasonable cause penalty relief, IRS administrative waiver or the statutory relief. The easiest and most straightforward step is to simply file the late tax return, check the IRS penalty notice, and determine if it is a failure-to-file penalty or failure-to-pay penalty or a combination of both, and then submit a suitable penalty removal request.

You may have many taxpayers looking for information on this topic since they filed their taxes late, and were issued a penalty or an IRS notice after filing late. Some haven’t filed on time, have unpaid tax and want to find out how to remove the IRS late filing penalty charges before they get worse.

So, if you’ve had a good tax compliance record, a solid reasonable cause explanation or documents that indicate your filing is due to a circumstance you could not have foreseen, you may qualify for IRS relief. IRS penalty relief is available to a taxpayer if necessary, through a penalty relief by phone request, a written letter or Form 843.

IRS Penalty Relief Process (Step-by-Step)

1: File the Late Tax Return

If required returns are not filed, it’s more difficult to get penalty relief. Failure to file penalty also will not increase after filing.

2: Review the IRS Notice or Account Transcript

Verify tax period, penalty type, penalty amount, interest amount, assessment date and due date to respond.

3: Check First Time Abate Eligibility

First Time Abate could be the quickest method if you have an excellent filing and payment background.

4: Prepare a Reasonable Cause Statement

A good IRS reasonable cause statement provides a good time line. It should detail the event, how it caused an event to not be filed or paid and the time you did correct the event.

5: Gather Supporting Documents

The more records you have to support your request, the stronger it is. The IRS favors the evidence over generalities.

6: Submit the Request

You can call the IRS, write a letter to the IRS requesting a waiver of the penalties, submit Form 843, or send a letter to the address listed on the IRS notice. A tax attorney (or an enrolled agent or a certified public accountant) can act as a representative to file Form 2848.

7: Track the Decision

Make copies of all correspondence (including proof of mailing, calls notes, names, dates and confirmation numbers).

8: Appeal or Reconsider if Denied

It isn’t always a case of “no”. This can be enhanced with better documents, a clearer timeline or a formal penalty appeal.

Why the IRS Charges Penalties After a Late Tax Return

Failure to File Penalty Explained

Generally the failure to file penalty applies when a taxpayer fails to file a required return by the due date, even though he/she has requested an extension of time for filing the return. This penalty may be particularly costly since the amount of the penalty is usually based on the unpaid tax reflected on the tax return on a monthly basis.

There is a scenario of a taxpayer who fails to file his taxes in April, files in June and still owes $6000, etc. Penalties can be imposed by the IRS for late filing of the tax return.

Failure to Pay Penalty Explained

Failure to pay penalty: if tax is not paid by the original tax payment deadline. One mistake that people make is thinking that the extension to file will also provide more time to pay. It doesn’t typically.

This is one of the most surprising things that often happens in tax resolution. A taxpayer files an extension, submits the return on time, but does not pay the tax by the original due date and thinks he will be exempt from an IRS late payment penalty but is not.

When Both Penalties Apply

Failure to file and failure to pay penalties could be imposed by the IRS if a tax return is late and the tax is late. The IRS may impose both penalties and interest, for instance, if a taxpayer files his Form 1040 three months late and is liable to pay $8,000. This is where IRS penalty abatement for tax penalties and interest becomes of paramount importance since any amount of relief can lessen the total amount.

What Happens After Filing Taxes Late?

The IRS can send an IRS balance due notice, a late filing IRS notice or an IRS notice after filing late tax return after a late-filed return is processed. Tax, penalties and interest can be displayed on the notice.

Prior to responding, verify the tax year, penalty type, penalty assessment date, interest amount, response deadline and phone number/address on the notice. The IRS notice will specify where to get IRS penalty relief after IRS notice and the deadline.

IRS Penalty Relief Options After Filing Late

First Time Penalty Abatement

First Time Abate may be available if taxpayer has a clean compliance record, has submitted required returns and has paid or arranged to pay tax due. Such is usually the simplest path for an individual who’s facing IRS late filing penalty relief with regard to a first-time concern.

Example: If a taxpayer does not file and pay taxes for several years until a time when he or she is late. If all the returns are filed now and the taxpayer has paid or made an installment agreement, he or she may be eligible for first time penalty abatement.

Reasonable Cause Penalty Relief

In cases where the taxpayer demonstrates reasonable cause penalty relief may be obtained where he has taken ordinary business care and prudence but was nonetheless unable to file and/or pay on time. Some good examples of reasonable cause include serious illness, death of a close family member, natural disaster, fire, absences due to urgent needs, which are not reasonable, postal delays, or some rejection issues for e-file.

In most cases, the IRS won’t provide relief because the taxpayer didn’t remember to file, was occupied, or didn’t have money to pay. This is the more robust request which details what occurred, when it occurred, how it hindered compliance, and what was done to correct the issue by the taxpayer.

IRS Administrative Relief and Statutory Relief

IRS administrative relief may be sought under First Time Abate, disaster relief or through other published IRS relief. There are narrower scenarios where statutory relief might apply, such as some of the cases in which the written advice from the IRS was not correct.

While some taxpayers will call this the IRS Penalty Relief Program, it’s important to grasp the basis for relief. Not all penalties are automatically withdrawn by the IRS. It is important to correlate information about the facts to the appropriate relief category.

Penalty Appeal or Reconsideration

If the IRS doesn’t provide any relief, then you may have other options. If you feel the penalty is incorrect, you may petition for reconsideration and/or give extra documentation or appeal to IRS Appeals (where relevant). Carefully the IRS should read the denial letter as it may include details about why the IRS denied the request and what should be done next.

Who Qualifies for IRS Penalty Relief?

In order to be eligible for IRS penalty relief you typically require one of the following:

• No record of tax evasion.
• A suitable explanation stating why the child or young person is not attending school.
• Evidence of a faulty assessment of the penalty.
• Admhs/Statutory relief eligibility.
• An opportune and well-sustained request for a waiver of the penalty.

In general, First Time Abate concentrates on compliance past. Reasonable cause is a fact and document based approach. Medical records, for instance, are needed for IRS penalty relief for illness while software rejection records and documentation of quick correction are needed for IRS penalty relief if e-file failed.

How to Write an IRS Penalty Abatement Letter

Here are some of the key elements to include in a penalty abatement letter:

• Identification of a taxpayer along with taxpayer contact details.
• Tax year and/or tax period.
• IRS notice number.
• Penalty type.
• Clean up request for abatement.
• Facts supporting relief.
• Dates and timeline.
• Documents attached.
• Signature.

When to Use Form 843 for IRS Penalty Abatement

Claim for Refund and Request for Abatement, Form 843, can be filed to seek abatement and/or a refund of various penalties, interest, fees and additions to tax. It’s commonly requested if the IRS calls for it, when the taxpayer is seeking a refund of a penalty that he or she has already paid, or when it is not possible to solve the problem by telephone.

In certain cases, a response in writing and/or a call may suffice for taxpayers. Form 843 might be a better option for others, particularly those who have already paid any penalties for which they were held liable by the IRS.

Documents Needed for IRS Penalty Relief

Helpful documents could consist of:

• IRS penalty notice.
• Late-filed return confirmation.
• Payment evidence/payment arrangement.
• IRS account transcript.
• Tax return transcript.
• Copy of an extension request.
• Penalty abatement letter.
• Form 843, if used.

Other items that may assist are medical records, death certificate, disaster records, insurance payments, bank records, e-file rejection notices, certified mail receipts or communications with a tax preparer. If you’ll be represented by a tax attorney, CPA or enrolled agent, then include Form 2848.

IRS Fees, Penalties, Interest, and Expected Costs

Generally, it is more serious to fail to file penalty than to fail to pay penalty. Failure to pay penalty can continue until tax is paid and interest may continue to accrue until such time as the tax is paid.

Interest on unpaid tax may not be waived in penalty relief but penalties may be reduced or removed. All interest on an abated penalty is not necessarily removed, but may be adjusted.

Professional costs vary. An Appeals matter may be more complex than a simple First Time Abate request or a Form 843 request by the IRS, and may be more expensive. The more complex cases, such as business penalty cases or payroll tax problems or multi-year tax debt penalties often take more time. In such cases, tax debt penalty relief from the IRS by professional may be an option.

Real-Life Examples

If the IRS has not received any other notice of non-compliance with one of its requirements, a first-time late filer who moved and did not receive the IRS mail may qualify for First Time Abate.

If a self-employed taxpayer has been hospitalized (near the tax filing deadline), and there are medical records to substantiate the timeline, they may have a reasonable cause argument.

Taxpayers whose returns were rejected after the due date must retain any rejection letters and documentation of timely corrected returns.

If a taxpayer is accused of causing an accountant to make mistakes, he or she should proceed with caution. In the case of the Supreme Court in United States v. Boyle, the Supreme Court clarified that it is the taxpayer’s burden to file on time.

Common Mistakes to Avoid

• Avoid taking too long after receiving an IRS notice.
• Please do not request relief until missing returns are filed.
• Don’t mix up an extension to file with an extension to pay.
• Never send a “hardship” letter without supporting documents!
• Don’t presume that penalties are excused if financial hardship occurs.
• Don’t neglect to pay interest.
• Be sure to include proof of mailing or IRS call records.
• Avoid making a feeble request again after it is denied.

Official IRS Guidance and When to Get Help

If the notice permits to call for relief then it can be effective. When documents are needed, a written request is likely to be more effective.

FAQs About IRS Penalty Relief After Filing Late

Can IRS penalties be waived after filing late?

Yes.

How do I ask the IRS to waive a late filing penalty?

Call IRS or send written abatement request and/or respond to notice or use Form 843 as applicable.

What is reasonable cause for late filing penalty relief?

Reasonable cause would be demonstrated by the use of ordinary care and prudence and the absence of ability to timely file due to the inability to do so because of circumstances beyond your control.

Does the IRS forgive penalties for first-time late filing?

If you comply, file and make payment arrangements with the IRS, you could qualify for First Time Abate.

Do I need Form 843 for penalty relief?

Not always.

Will IRS interest go away if penalties are removed?

Interest will be reduced if it is charged to an abated penalty but generally will not be reduced if it is charged on unpaid tax.

What if the IRS denies penalty relief?

Consider appealing, provide additional documentation or appeal to the IRS Appeals office (where applicable).

Can a tax lawyer help remove IRS penalties?

Yes. A tax attorney will examine the notice, draft the legal argument, file the request and represent you to the IRS.

Conclusion

IRS Penalty Relief After Filing Late is Possible, however, the best way to do this will depend on the IRS penalty, the type of tax year, compliance history, and why you filed late. Fill in missing returns, read IRS notice, collect evidence and select best route of relief.