How it works
The IRS removes penalties on two main grounds. First Time Abate (being replaced by Automatic Exemption from Penalty) covers failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers with a clean three-year history. Reasonable cause covers those and other penalties, including accuracy-related and international information return penalties, when you show you exercised ordinary care and still could not comply. Penalties already paid can be refunded on Form 843 within the refund statute.
Why it matters
Penalties and the interest on them often make up a third or more of an old balance, and the IRS does not remove them unless asked. Abatement is the first step in almost every collection case.
Example
A taxpayer with a 30,000 dollar balance has 6,000 dollars in failure-to-file and failure-to-pay penalties. With no penalties in the prior three years, First Time Abate removes them and the associated interest by phone.
Related: AEP, First Time Abate, reasonable cause, Form 843.
