Penalty Abatement

Full Definition

Penalty abatement is the removal or reduction of penalties assessed by the IRS for late filing, late payment, or other failures. There are two main types: First-Time Penalty Abatement (FTA) for taxpayers with a clean compliance history, and Reasonable Cause abatement for those who can demonstrate circumstances beyond their control prevented compliance. Common penalties that can be abated include failure-to-file penalties (up to 25%) and failure-to-pay penalties (up to 25%). Interest can only be reduced if it resulted from IRS errors.