The IRS assesses over 40 million penalties per year. First-Time Abatement alone removes penalties for taxpayers with a clean three-year compliance history — but the IRS does not proactively inform you of this option.
TYM CPAs assess penalty exposure, identify applicable abatement programs, and file relief requests with the documentation required for approval. The process is structured and documented.
Unaddressed penalties trigger escalating collection action. The timeline below applies to most assessed balances.
Each penalty type has different abatement options. Understanding which penalties apply determines the resolution strategy.
Applies when a return is not filed by the due date (including extensions). The minimum penalty after 60 days is $485 or 100% of unpaid tax, whichever is less. This is the most common penalty and the most frequently abated.
Applies when tax is not paid by the due date. Continues after the failure-to-file penalty caps at 25%. Reduced to 0.25%/month when an installment agreement is in effect. Combined maximum with failure-to-file: 47.5%.
Applies when tax is substantially understated (understatement > $5,000 or 10% of correct tax) or when negligence is involved. Requires documented reasonable cause — FTA does not apply. Common in audit situations.
Assessed against individuals responsible for collecting and remitting payroll taxes (941). The penalty equals 100% of unpaid employee withholding. Assessed personally against officers, owners, and bookkeepers with payment authority.
Applies when quarterly estimated payments are insufficient. Calculated per quarter. Safe harbor rules (100% of prior year tax or 90% of current year) prevent the penalty. Form 2210 is required to dispute or waive.
Applies to late or missing Forms 5471, 5472, 8938, FBAR (FinCEN 114). Penalties are assessed per form per year and can reach $100,000+ for multi-year non-compliance. Streamlined filing procedures reduce penalties for non-willful violations.
The client operated a US S-corporation from Toronto and had filed Form 1120-S late for four consecutive years — 2019 through 2022. The S-corp had two shareholders. Late S-corp penalties are assessed at $245 per shareholder per month, resulting in $490/month per year of delay.
TYM reviewed the filing history and identified that year 2019 qualified for First-Time Abatement ($5,880 removed). For years 2020–2022, TYM prepared a reasonable cause abatement request documenting that the client had relied on a prior advisor who failed to file and that the client had no knowledge of the delinquency until receiving an IRS notice in 2023.
The IRS accepted the reasonable cause argument for two of the three remaining years. Total penalties reduced from $34,800 to $4,200. The remaining balance was paid in full within 30 days of the abatement decision.
IRS penalty situations vary by penalty type and taxpayer profile.
CP2000, CP14, or CP501 notices with penalties you believe are incorrect or subject to abatement. TYM reviews the notice, identifies abatement eligibility, and responds within the required window.
Penalties paid in the last two years may be eligible for retroactive abatement. The IRS allows abatement requests after payment in certain circumstances — TYM assesses whether a refund claim is viable.
Form 1120-S and Form 1065 late filing penalties are assessed per shareholder/partner per month. Multi-year delinquency in entities with multiple owners can result in six-figure penalty balances.
941 deposits missed or late, resulting in Trust Fund Recovery Penalty assessment. TFRP is assessed personally against responsible parties — not just the business entity.
Late or missing FBAR, Form 5471, or Form 8938 filings. Penalties start at $10,000 per form per year and escalate. Streamlined filing procedures are available for non-willful violations.
20% accuracy-related penalty assessed after an audit. Reasonable cause and good faith arguments can reduce or eliminate this penalty — but require documented support.
A structured abatement process — not a phone call to the IRS.
TYM pulls IRS account transcripts, identifies all assessed penalties and interest, and evaluates eligibility for FTA, reasonable cause, and statutory exceptions. This assessment drives the abatement strategy.
FTA is available for failure-to-file and failure-to-pay penalties when the taxpayer has no penalties in the prior three years and is current on all filings and payments. TYM files the request with the correct IRS unit.
When FTA is not available, TYM prepares a written reasonable cause request with supporting documentation — medical records, disaster declarations, advisor correspondence, or IRS error documentation.
When penalties were assessed on an incorrect return or without proper notice, TYM files a penalty reconsideration request with an amended return or corrected documentation.
When the IRS denies an abatement request, TYM files a formal appeal with the IRS Independent Office of Appeals. Appeals result in abatement in a significant percentage of cases where the initial request was denied.
When a balance remains after abatement, TYM negotiates installment agreements, Currently Not Collectible status, or Offer in Compromise — preventing liens, levies, and passport restrictions.
TYM pulls IRS account transcripts and calculates the full penalty and interest balance. All applicable abatement programs are identified before any request is filed.
TYM determines the optimal abatement approach — FTA, reasonable cause, or reconsideration — based on the penalty type, filing history, and available documentation.
Supporting documentation is assembled: filing history transcripts, compliance records, and any evidence supporting reasonable cause (medical, disaster, advisor error).
The request is filed with the correct IRS unit — Automated Underreporter, Compliance, or Penalty Abatement Coordinator — depending on the penalty type and situation.
TYM monitors the IRS response, follows up on delayed decisions, and prepares an appeal if the initial request is denied.
TYM confirms penalty adjustments on the account transcript and establishes a payment arrangement for any remaining balance.
Penalty abatement engagements are priced based on penalty type, number of years, and complexity of the abatement argument.
Multi-year abatement engagements are available at a reduced per-year rate. Exact fees are confirmed after the penalty assessment.
TYM's Miami office handles IRS penalty abatement for individuals and businesses in South Florida. TYM CPAs are licensed in Florida and authorized to represent clients before the IRS under Power of Attorney.
TYM's Toronto office serves Canadian residents with IRS penalty exposure — including US citizens abroad, Canadians with US business income, and cross-border professionals. International information return penalties (FBAR, Form 5471) are a particular focus.
When the IRS has already contacted you, TYM handles all communication and negotiation under Power of Attorney — audits, levies, and collection actions.
For multiple unfiled years — TYM reconstructs records, files in sequence, and applies for abatement as part of the same engagement.
One missed deadline with a single year of penalties. TYM files the return and abatement request simultaneously.
Overview of all US tax compliance and resolution services TYM provides for individuals and businesses.
In most cases, no. The IRS allows penalty abatement requests within two years of paying the penalty or three years of filing the return — whichever is later. FTA requests can be made by phone or in writing. Reasonable cause requests require written documentation. TYM assesses the timeline before filing.
First-Time Abatement (FTA) is an IRS administrative waiver that removes failure-to-file and failure-to-pay penalties for one tax year. To qualify: no penalties in the prior three years, all required returns filed, and all tax paid or in an installment agreement. FTA is available once per taxpayer and is not publicized by the IRS.
Reasonable cause applies to failure-to-file, failure-to-pay, and accuracy-related penalties. The IRS accepts: serious illness, natural disaster, reliance on a tax advisor who gave incorrect advice, IRS error, or inability to obtain records. The cause must be documented — a verbal explanation is not sufficient.
FTA requests filed by phone are typically resolved in 1–2 weeks. Written reasonable cause requests take 6–12 weeks for initial IRS response. Appeals take 3–6 months. TYM monitors processing and follows up on delayed decisions.
Interest is generally not abatable — it is a statutory charge that cannot be waived. The only exception is interest that accrued due to an IRS error or IRS delay (ministerial or managerial act). When penalties are abated, the interest on those penalties is also removed.
A denial can be appealed to the IRS Independent Office of Appeals. Appeals result in abatement in a significant percentage of cases where the initial request was denied — particularly when the original request lacked documentation. TYM prepares formal written protests for all appeals.
The content on this page is for informational purposes only and does not constitute professional tax or legal advice. IRS penalty rates, abatement eligibility criteria, and collection procedures are subject to change. The case study describes a specific engagement and is not representative of all outcomes. Abatement approval depends on individual circumstances and IRS discretion. Confirm current obligations and options with a licensed CPA or tax attorney before acting on any information presented here.