The Tax Relief Answer Book
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Chapter 09

Penalties and Interest

How penalties and interest grow an IRS balance, which facts matter for relief, and how to verify an account before requesting an adjustment.

Reviewed for federal tax accuracy by Calculus Tax

Reviewed

Calculus Tax is a related tax-services provider. Editorial review does not create a professional-client relationship or make Calculus Tax the reader's representative before the IRS.

Balance growth

Why does my IRS balance keep growing?

Interest and applicable penalties can continue to accrue on unpaid tax, so the balance may change until the account is paid or adjusted.

Compare the notice or transcript by tax year and separate assessed tax, penalties, interest, payments, and credits. A payment plan may spread payments but does not necessarily stop all additions to the balance. If the assessment or payment history is wrong, use the IRS correction or appeal channel rather than relying on an estimated payoff amount.

Tax transcripts and accountsOptions if you cannot pay
IRS: Penalties IRS: Interest

Penalty relief

Can IRS penalties be removed?

Sometimes. Penalty relief depends on the penalty, the tax period, the taxpayer’s history, and whether the facts meet an IRS relief standard.

First identify the penalty type and the tax period. Possible relief standards can include reasonable cause, administrative relief for qualifying taxpayers, or other specific provisions. Provide a clear explanation and supporting records where required. The IRS automatically reduces or removes the related interest when a penalty is reduced or removed; interest on unpaid tax generally remains. Administrative relief now includes Automatic Exemption from Penalty (AEP) for eligible returns beginning with 2025 annual returns and 2026 quarterly returns.

Penalty reliefPenalty abatement calculator
IRS: Penalty relief IRS: Administrative penalty relief and AEP

Administrative relief

Who may qualify for first-time penalty abatement?

First Time Abate (FTA) requires a request and qualifying compliance history. Beginning summer 2026, Automatic Exemption from Penalty (AEP) can instead prevent eligible penalties from being assessed on qualifying original returns.

AEP begins with eligible 2025 annual returns and 2026 quarterly returns, and subsequent periods. The IRS checks three prior years of timely compliance, or 12 consecutive quarters, with the same return type and additional business requirements. Eligible penalties include failure to file, failure to pay, and failure to deposit. The IRS sends a notice when AEP applies; no request is needed. FTA remains available for eligible earlier periods and returns not considered for AEP. If a penalty is assessed and you believe AEP should apply, contact the IRS. Tax, interest, and penalties outside the relief remain payable.

Read the canonical guide Penalty relief guide
IRS: First Time Abate and Automatic Exemption from Penalty

Interest relief

Can IRS interest be reduced or removed?

Interest relief is narrower than penalty relief and usually depends on an IRS error, unreasonable delay, or a specific statutory or administrative rule.

Separate interest caused by unpaid tax from interest connected to a penalty. Review the account history and identify whether an IRS error or delay affected the calculation. When a penalty is reduced or removed, the IRS automatically reduces or removes the related interest. This does not eliminate interest on the unpaid tax. Separate relief for interest on tax requires its own legal basis.

Tax account transcriptDispute IRS liability
IRS: Interest

IRS penalty abatement: administrative relief, reasonable cause and next steps

Penalty relief may remove or reduce a qualifying penalty; it does not generally cancel the underlying tax. First identify the penalty and tax period, then distinguish administrative relief based on compliance history from reasonable cause based on the facts of a specific failure.

Before you take the next step

  • Keep the notice, tax period, penalty type and relevant filing/payment history together.
  • For reasonable cause, write a timeline explaining what happened, when, how it prevented compliance and what you did to correct it.
  • Collect relevant records and follow the notice or Form 843 instructions. Do not assume one deadline or form fits every penalty.

Common questions

What is the difference between First Time Abate and Automatic Exemption from Penalty?

Current IRS guidance describes a summer 2026 transition to Automatic Exemption from Penalty (AEP). For eligible original 2025-and-later annual returns and 2026-and-later quarterly returns, AEP can prevent assessment of covered penalties based on timely compliance history. First Time Abate (FTA) remains a request-based route for eligible assessed penalties and periods not considered for AEP. Check the return type, period and IRS notice rather than assuming automatic relief applies.

What compliance history does administrative penalty relief consider?

The IRS generally examines timely filing of the same return type for the preceding three years, or 12 consecutive quarters, and the applicable penalty history. Additional business requirements apply. Covered failures include certain failures to file, pay or deposit; not every penalty qualifies.

What counts as reasonable cause for penalty abatement?

The IRS considers whether you exercised ordinary care and prudence but still could not comply. Serious illness, a disaster, unavailable records or system issues may be relevant when supported by the facts. Lack of money alone generally is not enough, and reliance on a preparer does not automatically excuse a late filing or payment. Rules differ by penalty; reasonable cause does not apply to certain penalties such as estimated tax penalties.

How do I request penalty relief and what records should I prepare?

Call the number on your notice with the notice, penalty and explanation ready. Some requests can be handled by phone; others require a written statement or Form 843 under the applicable instructions. For reasonable cause, include dates, how the event prevented compliance, corrective efforts and relevant medical, disaster, correspondence or payment records. FTA does not require the same reasonable-cause narrative.

Does penalty abatement also remove interest or stop collection?

The IRS generally reduces or removes interest related to a penalty it removes or reduces. Interest on the underlying unpaid tax is a separate issue. Do not treat a pending penalty request as a payment arrangement or automatic collection hold; address any notice deadlines and payment problem separately.

What if my penalty relief request is denied?

Read the decision letter for the applicable appeal procedure and deadline. Keep a copy of your request, supporting records and the IRS response. Do not substitute a generic deadline or assume a penalty appeal provides the same rights as a collection hearing.

Official sources

Sources checked November 2, 2026. This update is source-linked educational guidance, not a new professional tax-accuracy review or an eligibility determination. Check current IRS instructions and your actual notice.

Where to go next

Use the preparation checklistHave a question about penalty relief?

Before you start: Have the penalty type, tax period and a timeline of what happened available.

Your inquiry goes to ReliefGeek’s website operator. Any follow-up can clarify your question and information needs using your selected contact method and consent. No obligation to hire; a response or connection is not guaranteed.

Do not send Social Security numbers, account numbers or tax documents. Submitting does not appoint an IRS representative or pause a deadline.

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