How to Challenge IRS Penalties (Abatement and Appeals)

IRS Penalties Can Be Reversed—If You Know What to Do

If you’ve been hit with IRS penalties for late filing, late payment, or underpayment, you’re not alone. These charges can stack up quickly—often adding thousands of dollars to your tax bill. The good news? You may not have to pay them.

The IRS offers several ways to request penalty abatement or challenge penalties through the appeals process—but it requires the right timing, documentation, and strategy.

In this post, we break down the most common types of IRS penalties, who qualifies for relief, and how to request an abatement or appeal a denial.

The Most Common IRS Penalties

• Failure to File Penalty – 5% of unpaid tax per month (up to 25%)
• Failure to Pay Penalty – 0.5% of unpaid tax per month (up to 25%)
• Estimated Tax Penalty – For not making adequate quarterly payments
• Accuracy-Related Penalty – 20% for substantial understatement or negligence
• Trust Fund Recovery Penalty – Serious consequences for payroll tax violations

These penalties accrue on top of interest and can dramatically increase your total IRS balance.

Related: What happens after receiving an IRS audit assessment

Option 1: Request Penalty Abatement for Reasonable Cause

If you had a legitimate reason for falling behind, you may qualify for IRS penalty abatement under the “reasonable cause” standard.

Accepted reasons include:

• Serious illness or injury
• Death in the immediate family
• Fire, flood, or natural disaster
• Theft or loss of records
• Reliance on incorrect advice from a tax professional

You must demonstrate that the issue was beyond your control and that you acted responsibly once the issue was resolved.

Related: IRS Tax Transcripts – Why They Matter

Option 2: First-Time Penalty Abatement (FTA)

If this is your first penalty in the past three years, and you're otherwise compliant, you may qualify for automatic penalty relief under the First-Time Abatement policy.

FTA can apply to:

• Failure to File
• Failure to Pay
• Failure to Deposit (for businesses)

FTA is easier to request and doesn’t require supporting documentation—just eligibility confirmation.

Related: Why the IRS Rejected Your Offer in Compromise

Option 3: Appeal the Penalty

If the IRS rejects your abatement request, you can:

• Submit a formal appeal to the IRS Independent Office of Appeals
• Use Form 843 or include a detailed letter outlining your case
• Strengthen your defense by filing an appeal through a CDP hearing if the penalty is tied to enforced collections

Related: IRS Notice of Intent to Levy – Urgent Steps to Take

Appeals give you an opportunity to present evidence and argue that the penalty was unjust or misapplied.

How to Submit a Penalty Abatement Request

Step 1: Gather documentation
Medical records, disaster reports, legal filings, proof of advice relied on, etc.

Step 2: File the right forms

Use Form 843 or include a letter with your response to the IRS notice

Step 3: Submit to the correct IRS office
This is typically the address on the penalty notice (CP504, CP15, etc.)

Step 4: Follow up and track your transcripts
Use Tax Transcripts – Why They Matter to confirm your penalty code is removed if approved.

What If You Still Owe the Penalty?

Even if abatement is denied, you can still resolve the penalty using:

• Installment Agreements
• Settle penalties through an Offer in Compromise
• Pause collections with Currently Not Collectible status
• Seek relief for California Franchise Tax Board penalties if your balance involves both federal and state obligations
• Explore solutions with experts who provide IRS tax relief near you

Don’t ignore the penalty—many cases are denied simply because the taxpayer never asked.

We Help Orange County Taxpayers Challenge IRS Penalties

At Boulanger CPA and Consulting PC, we help individuals and businesses:

• File strong penalty abatement requests
• Appeal denials with real evidence
• Use penalty relief to support broader settlement strategies
• Monitor IRS account transcripts to confirm removal

For additional strategies and step-by-step support, be sure to get the full story in Defend What’s Yours—a comprehensive guide to protecting yourself from unnecessary penalties and collections.

Call (657) 218-5700 or schedule a strategy call at www.orangecounty.cpa

Get the aggressive, local support you need.

📣 About the Author

Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.

With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.

Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.

Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.

📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.