How Long Does It Take? IRS Penalty Abatement
There are more than 150 types of IRS penalties. The two most common penalties for penalty removal (or, “abatement”) are the failure to file and failure to pay penalties. They make up more than 70% of all penalties the IRS charges (or, “assesses”).
How long does it take to get penalty abatement for late filing or late paying?
It depends on the type of penalty relief you’re requesting.
There are two main reasons the IRS will abate these two penalties:
- Reasonable cause – when you have a justifiable reason for filing or paying late (according to IRS standards)
- First-time abatement – when you have a clean compliance history for the past three years
You can call the IRS to ask for either of these types of penalty relief, but if you owe more than a certain amount, you’ll have to request reasonable cause relief in writing. (The IRS doesn’t disclose the amount.)
Here’s how to request penalty abatement for the late filing and/or late payment penalties – and how long it might take:
|Penalty abatement reason||Request by phone||Written request|
|Reasonable cause||Call the IRS for penalties that are less than $500. The IRS will ask detailed questions and record your information.
Then, the IRS may:
|Write a letter requesting reasonable cause abatement, or send Form 843, Claim for Refund and Request for Abatement. The IRS decision usually takes about three to four months.|
|First-time abatement||You’ll get an instant decision. If you’re successful, the IRS will remove the penalties on your account and send you a letter in two to three weeks (usually IRS letter 3503C).||Write a letter requesting first-time abatement, or send Form 843. The IRS decision usually takes about two to three months.|
Consider appealing if you’re not successful
If the IRS denies your request for penalty abatement, you’ll probably receive IRS letter 854C. You can request an appeal within 60 days of the determination.
In fact, many people have to appeal reasonable cause denials. That’s because IRS phone representatives use an automated tool to make penalty-relief determinations, and that tool can be unreliable.
If you want the IRS to look at the totality of your circumstances, you must ask for an appeal. Appealing can add three to nine months to the process.
If the IRS is trying to collect from you, you may be able to request a Collection Due Process hearing, which can shorten the appeals process to about two to four months.
The other two most common penalties are the estimated tax penalty and the accuracy penalty
Getting relief for these penalties isn’t as straightforward as the late filing and late payment penalties. Here’s more about each one.
Estimated tax penalty abatement is possible in certain circumstances
The IRS charges estimated tax penalties when taxpayers don’t withhold enough from their paychecks (wage earners) or don’t make enough estimated tax payments (mainly investors, small business owners, or gig economy workers).
The IRS rarely abates estimated tax penalties (less than 1% annually). Most people address this penalty when they file their return with a Form 2210, Underpayment of Estimated Tax by Individuals. This form allows filers to provide the IRS with an exception to remove or reduce the estimated tax penalty.
It is possible to request abatement of estimated tax penalties for hardships. To try to request abatement for estimated tax penalties for a hardship situation, send Form 843 to the IRS. If there was a casualty, disaster, or other unusual circumstances outside of your control, you can make your case. You’ll likely wait two to four months for an initial determination.
Accuracy penalty abatement can be a long wait
The IRS assesses accuracy penalties in audits and underreporter inquiries (CP2000 notices). This penalty is usually 20% of your tax balance, charged for negligently preparing your return or not reporting a substantial amount of income. Your main chance to contest this penalty is during your audit or inquiry, before the IRS officially assesses the penalty.
It is possible to request abatement of this penalty, but be prepared to wait. Accuracy penalty abatement requests can take years. Why? Because the IRS will have to reopen the audit or underreporter inquiry and re-examine the facts.
If the IRS denied your penalty abatement request during the audit/underreporter inquiry – or if you agreed to the penalty – the IRS probably won’t consider your abatement request. The IRS will likely enforce the correct process, which means you’ll need to pay the taxes and penalties and then file a claim with the IRS to request penalty abatement.
In most cases, the IRS takes its time reconsidering the accuracy penalty – often leading taxpayers to take the IRS to court to get the penalty removed. All in all, it’s best to contest accuracy penalties at the right time: during the audit or underreporter inquiry.
Learn more about how to address IRS penalties. Or, your local tax professional can deal with the IRS for you. Your tax pro will look into your penalty relief options to see what fits best for your situation – and call or write to the IRS to request penalty abatement from the IRS for you. Learn more about H&R Block’s Tax Audit & Notice Services. Or make an appointment for a free consultation with a local tax professional by calling 855-536-6504 or finding a local tax pro.
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