Penalty Abatement Help

You’re in the Right Place If…

Our penalty relief services help taxpayers with IRS and state penalties, including if…

• Your IRS or New York tax balance is significantly higher than what you originally owed due to penalties.
• You filed or paid late because of illness, a death, a disaster, or circumstances outside your control.
• You relied on a tax professional who handled your taxes incorrectly
• You have otherwise consistently filed and paid on time.
• You have already requested abatement and were denied.

What Penalty Abatement Actually Is

Penalty abatement occurs when a tax agency reduces or removes penalties from a tax bill. Reducing or removing penalties does decrease your total tax bill, and it may also eliminate interest charged on removed penalties. However, it does not affect the underlying tax balance.

You may use penalty relief as an early step in your tax resolution strategy. Reducing or eliminating your penalties can significantly decrease your tax bill, allowing you to address the rest of your tax debt via an IRS payment plan, an offer in compromise, or other form of relief.

The Penalties You Might Be Facing

Part of requesting penalty relief is identifying exactly which penalties were assessed. Some penalties you may have been charged include:

• Failure-to-file: The IRS may assess this penalty when you submit a required return late without an extension. Because this penalty adds up quickly, you should consider addressing any unfiled tax returns you currently have right away.
• Failure-to-pay: This penalty applies when you fail to pay your tax bill by the due date. There are several ways to address unpaid taxes that can help minimize this penalty.
• Failure-to-deposit: Businesses must follow strict deposit requirements when remitting payroll taxes to the IRS. If they don’t, penalties may follow.
• Accuracy-related: When a taxpayer substantially understates their taxes, the IRS may assess an accuracy-related penalty.
• Estimated tax: Some taxpayers have to make quarterly estimated tax payments, and failure to do so may result in penalties.
• New York State: The New York Department of Taxation and Finance assesses penalties for late returns, late payments, understatements, negligence, and other compliance failures on individual income tax returns, sales tax liabilities, and other state taxes.

Ways Penalties Can Be Reduced or Removed

There are multiple penalty abatement programs available, and the right one for your situation depends on the facts in your case.

Reasonable cause abatement is the central form of relief in many contested penalty matters. These situations are evaluated on a case-by-case basis, as the IRS bases its decisions on the totality of the circumstances. Generally, you must be able to show that you exercised ordinary care but were still unable to file, pay, deposit, or report correctly. 

A successful reasonable cause request often goes beyond a single statement of your hardships. We help connect what happened to the specific failure, explain the timeline, highlight your efforts to comply, and include important supporting documentation.

First-time abatement is another option that has brought many taxpayers significant financial relief over the years. In the past, taxpayers had to request first-time abatement via IRS Form 843. The IRS now automatically applies this form of relief for taxpayers who have three years of tax compliance immediately prior to the penalty.

There are also cases where relief is available via exceptions written into tax law and for cases involving erroneous written advice from the IRS. These situations are highly fact-specific.

New York reasonable cause relief may be available to taxpayers who can show reasonable cause for failure to comply. This program may be similar to the IRS’s reasonable cause program, but it’s still different enough that it’s important to work with a New York tax professional. Learn more about our representation for issues with New York State taxes.

How Penalties Pile Up

This issue often starts with a late return or payment. The IRS may send a CP14 balance due notice to remind you to pay. If they do not receive a response, they may escalate to CP501, CP503, and eventually CP504, which warns you of the IRS’s intent to levy. As the notices pile up, the penalties continue to accrue.

The Risk of Leaving Penalties Unaddressed

Throughout this process, the penalties continue to accumulate. The failure-to-file penalty, for example, is 5% of your balance due for each month or partial month your return is late, capped at 25% of the initial bill. In addition to the penalty itself, you have to account for IRS interest. IRS interest compounds daily, allowing for rapid growth of your balance.

Additionally, many forms of relief are time-sensitive. The longer you let your tax bill grow, the closer the IRS may get to liens or levies. Being proactive gives you access to more options.

How McLaud Law Helps

Our team works to take control of your tax situation immediately and develop a plan that gets you back on track. After reviewing your notices and transcripts, we determine which penalties may qualify for relief. We then begin working on your reasonable cause case, focusing on both the narrative and the supporting documentation that tax agencies look at.

After submitting your request, we handle all communication with the tax agency. If your request is denied, we explain your IRS appeals options and pursue an appeal if the facts of your case warrant further review.

Our approach doesn’t stop at penalty relief. We utilize penalty abatement as part of a broader tax strategy that addresses your unpaid tax liability as a whole.

McLaud Law P.C. combines the experience of tax attorney Charles B. McLaud with the skills of enrolled agents Steven J. Litteer and Andrea M. Litteer. Our attorney and enrolled agent team handles federal and New York State tax matters, allowing us to help clients with overlapping tax needs and concerns.

What the Process Looks Like

Our process begins with a free consultation. We review your notices and compliance history so we can identify the strongest grounds for relief. Our team assembles documentation and builds a narrative supporting your request for relief. After submitting the request, we follow up, respond to IRS requests, and appeal if denied.

Possible Outcomes

If the facts support relief, you may see a full removal of qualifying penalties or a partial reduction of penalties. With these outcomes, interest tied to the penalty amount may also be reduced.

The tax agency may also deny your request. In this situation, we can pursue an appeal if the facts support it.

When to Bring in a Tax Attorney or Enrolled Agent—and When You Might Not Need One

If you have a clean history of tax compliance and this is your first time being penalized, you may qualify for first-time abatement (now known as Automatic Exemption from Penalty). While this should be automatic, it may still be missed by the IRS’s automatic systems. You may be able to resolve an issue like this without professional assistance.

However, if you’re facing penalties that make up a sizable portion of your bill, an accuracy or fraud penalty, years of penalties, or a reasonable cause case that you need help building, we highly recommend professional assistance.

Frequently Asked Questions

Can the IRS really remove my penalties?

Yes. The IRS can remove certain penalties based on reasonable cause, an administrative waiver, an IRS error, or first-time relief. Whether or not you are approved depends on the type of penalty and the facts of your case.

What counts as reasonable cause?

Reasonable cause generally means that you exercised ordinary care and tried to comply with tax requirements but were unable to comply because of circumstances outside your control. Common examples include serious illness, death, natural disaster, and destroyed records.

Will penalty abatement also affect my interest?

It can reduce your interest owed by reducing interest charged on penalties. It does not remove interest arising from the tax debt itself.

Does penalty abatement reduce the tax I owe?

Penalty abatement can reduce your tax bill by reducing or removing penalties, but it does not decrease the initial tax amount billed to you.

Can New York State tax penalties be reduced?

Certain New York penalties can be waived or reduced if you prove reasonable cause or have another qualifying basis for relief.

What is first-time penalty abatement?

This is a type of relief given to taxpayers with a history of tax compliance and no previous penalties. The IRS started transitioning to automatic first-time penalty relief in mid-2026.

What happens if my request is denied?

You may be able to provide additional evidence or request an administrative appeal. However, there is a deadline for these options, so it’s important to read the notice you receive from the IRS.

How far back can I request penalty relief?

The answer for your case depends on whether you are requesting an abatement or refund. If you’ve already paid the penalty and are asking for a refund, you generally cannot request a refund later than three years after the tax return was filed or two years after the penalty was paid, whichever date was later.

Penalties Inflating Your IRS Bill? We’ll Help You Request Relief.

Penalties piling up? We’re here to help review your IRS or New York State notices, identify potential grounds for relief, and communicate with tax agencies on your behalf. In addition to helping with your penalties, we’re also here to assist in addressing the remaining tax balance. Call 585-397-7785 or contact us online for your free and confidential consultation.

This communication is Attorney Advertising. It is presented for informational purposes only and does not constitute legal advice. Every legal situation is different, and prior results do not guarantee a similar outcome. This communication does not create an attorney-client relationship between McLaud Law P.C. and the recipient.