IRS Penalty Relief Options

IRS Penalty Relief Options

The IRS recognizes that taxpayers sometimes make mistakes despite making a good-faith effort to comply with the tax law. Depending on your circumstances, you may qualify to have certain penalties reduced or removed.

Automatic Exemption Penalty Program (NEW)

Introduced in summer 2026, the Automatic Exemption Penalty Program (AEP) suppresses some failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers with strong compliance histories. The IRS will review the taxpayer history considering the taxpayer’s timely filing and payment records for the previous three years. This program will begin with 2025 tax year returns and 2026 quarterly returns.

Types of penalty relief:

• First time penalty abate and administrative waiver:

The first-time penalty abate and administrative waiver is a common administrative penalty waiver provided by the IRS. This applied to taxpayers with three years of timely compliance history.See program is being phased out and replaced by the Automatic Exemption Penalty Program (see abov).

https://www.irs.gov/payments/administrative-penalty-relief

 

• Reasonable cause:

Reasonable cause is determined on a case-by-case basis by the IRS and may have certain penalties removed or reduced if you acted with reasonable cause and in good faith. Examples may include:

• Serious illness or death in the immediate family
• Natural disasters or other unavoidable events
• Destruction of records
• Other situations where you acted in good faith

Below is more information regarding eligibility

https://www.irs.gov/payments/penalty-relief-for-reasonable-cause

 

• Statutory exception

This penalty relief allows for penalty relief under certain statutory exemption. Below is more information regarding eligibility, such as:

• Relied on incorrect written advice from us
• Mailed a return on time
• Lived in a federal disaster area
• Were involved in military operations in a combat zone

 

https://www.irs.gov/payments/penalty-relief-due-to-statutory-exception

 

 

How to request relief if Automatic Penalty Relief was not realized

Follow the IRS Instructions on the notice sent by the IRS. You may need to fill out Form 843: “Claim for refund and request for abatement”. Because every taxpayer’s situation is unique, different methods apply to individual circumstances.

 

If you would like to learn more about IRS Penalty Relief to set up a consultation, call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730.

The above information is of a general nature only and should not be relied upon for specific situations.