Tax relief/Penalty abatement
IRS penalties are not always final. Many can be removed.
Penalties, and the interest charged on them, can add a quarter or more to what you owe. The IRS has established ways to remove them, but it rarely offers them on its own. A California licensed CPA identifies which penalties qualify and makes the case for you. Fixed fee, agreed before the work begins.
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The penalties that add up
Most IRS balances are not just tax. By the time a notice arrives, penalties and interest are often a significant part of what is owed, and they keep growing every month the balance stays open. Together, the two most common penalties can reach 47.5 percent of the unpaid tax before interest is counted.
Failure to file
5 percent of the unpaid tax for each month or part of a month a return is late, up to 25 percent.
Failure to pay
0.5 percent of the unpaid tax each month, up to 25 percent. The rate doubles to 1 percent a month once the IRS issues a notice of intent to levy.
Failure to deposit
For businesses, penalties of 2 to 15 percent on payroll tax deposits that are late or made incorrectly.
Interest on penalties
Interest accrues on penalties as well as on tax. When a penalty is removed, the interest charged on it comes off with it.
The paths to penalty relief
Penalty relief is not a favor the IRS grants at random. It follows specific rules, and the outcome depends on choosing the right path for each year and presenting it properly.
First Time Abate
An administrative waiver for taxpayers with a clean record. If you had no significant penalties in the prior three years, have filed all required returns, and have paid or arranged to pay the balance, the failure to file, failure to pay and failure to deposit penalties for one period can generally be removed without proving a reason.
Reasonable cause
If you used ordinary care and prudence and still could not comply, penalties can be removed for any year. Serious illness, a death in the family, a natural disaster, destroyed records, and reliance on incorrect professional advice can all qualify when properly documented.
Incorrect IRS advice
When the IRS gave you incorrect written advice and you relied on it, the resulting penalty must be removed.
Correcting the record
Some penalties are simply wrong: computed on a balance that was later reduced, charged on a return that was filed on time, or based on an IRS prepared return that overstated your tax. Correcting the underlying assessment eliminates the penalty with it.
Where people leave money on the table
Penalty relief is often lost not because the facts were weak, but because of how and when it was requested.
Spending First Time Abate too early
The IRS often applies First Time Abate automatically, even when reasonable cause would have worked. Because the waiver depends on a clean three year history, using it on the wrong year can leave you without it when a larger penalty arrives.
Accepting the first denial
First requests are frequently screened by automated systems and phone representatives. A denial can be appealed, and a carefully documented reasonable cause case often fares better before the IRS Independent Office of Appeals.
Waiting too long after paying
You can still claim relief after the balance is paid, but a refund claim must generally be filed within three years of filing the return or two years of paying the tax. Miss that window and the refund is gone.
Never asking
In most cases the IRS does not review your account for relief on its own. If no one asks, the penalties stay.
How Kim Accounting & Advisory handles it
One CPA works your case from the first call to the final resolution. Here is what that looks like for penalty abatement.
- 1
Audit every penalty
We pull your account transcripts and list every penalty assessed, by year and type, along with the interest each one has generated.
- 2
Choose the strongest path
We decide which years should rely on reasonable cause and which on First Time Abate, in the order that removes the most penalty over time.
- 3
Make the case
We prepare the written request with supporting documentation, pursue it with the IRS, and take it to Appeals if the first answer is wrong.
Have penalties on your IRS balance?A short call will tell us which ones are worth challenging, and how.
Find out where you standCommon questions
Straight answers to what people ask us most about penalty abatement.
Can interest be removed too?
Interest on the tax itself is set by law and can be reduced only in narrow situations, such as an unreasonable IRS error or delay. Interest charged on a penalty, however, is removed automatically when the penalty is.
Do I have to pay the balance before asking for abatement?
No. You can request relief while a balance is still owed. First Time Abate does require that the tax be paid or that a payment arrangement be in place, and removing penalties first lowers the amount any payment plan has to cover.
Are some penalties not eligible?
Accuracy related penalties from an audit and penalties for underpaying estimated tax follow different rules and generally do not qualify for First Time Abate. Some can still be addressed on other grounds, and we will tell you which apply to your account.
How much can penalty relief save?
Failure to file and failure to pay penalties together can reach 47.5 percent of the unpaid tax, plus interest on top. On a significant balance, relief can be worth more than any other single step in a resolution.
What clients say
“I’d like to start by expressing my appreciation for Jason’s patience and thoroughness. My situation was quite complicated, but he guided me through every step of the process with clarity and care! What stood out most was his willingness to offer thoughtful advice, and if he didn’t have an immediate answer, he took the time to research and ensure he provided the best possible guidance. He consistently went above and beyond to assist me, and I highly recommend his services!”
Anibal Ruelas
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Often part of the same problem
IRS problems rarely arrive one at a time. These are the issues that most often come up alongside IRS penalties.
Stop paying penalties you may not owe
At Kim Accounting & Advisory, penalty relief is reviewed on every case, never treated as an afterthought. Jason Kim examines each penalty on your account, chooses the strongest argument and presents it to the IRS himself, for a fixed fee agreed before the work begins.
- Find out which penalties on your account can be challenged
- Learn whether First Time Abate or reasonable cause fits
- Know the full cost before you commit
Free consultation
One conversation with a licensed CPA. No obligation and no pressure. If we are not the right fit, you will still leave with a clear next step.
Find out where you standServing clients nationwide, fully virtual.