IRS Debt Reduction: Penalty Abatement

Last updated on May 31, 2022

The IRS charges penalties for various kinds of non-compliance, including the failure to pay taxes. Taxpayers who have a tax debt may be surprised to discover their tax debt increases because of penalties and interest the IRS charges monthly. The forgiveness or reduction of penalties is an option taxpayers can look into in order to reduce their total IRS debt amount.

The reduction or forgiveness of penalties involves applying for a Penalty Abatement by completing IRS Form 843. It is important for taxpayers to cite the reason for their non-compliance because the IRS only considers a ‘reasonable cause,’ which usually are reasons that are beyond the control of the taxpayer, such as natural disasters, death in the family, or theft.

Those taxpayers who do not qualify for a reduction of tax debt through other IRS payment plans may attempt to reduce their overall amount through a Penalty Abatement. The IRS does not have set guidelines for a Penalty Abatement.

Taxpayers can improve their chances of qualifying for a Penalty Abatement by providing a ‘reasonable cause’, getting their case professionally prepared, and effectively negotiating with the IRS.