How to Remove IRS Tax Penalties and Get Relief

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By Ergedine Pericles, CPA | April 2, 2025

Introduction

Facing IRS tax penalties is frustrating—especially when you’re already dealing with tax debt or late filings. Whether you’re an individual or a business, these penalties can quickly add up and put a serious strain on your finances. The good news? You do have options.

As a CPA firm specializing in IRS tax resolution, we help taxpayers request penalty abatement and deal directly with the IRS to reduce or eliminate penalties. This blog explains how we guide clients through the IRS civil penalty abatement process—from understanding your rights to submitting the right documentation.

Know Your Rights: What the IRS Can and Cannot Do

Before we dive into how to reduce or remove tax penalties, it’s important to know that you have protections as a taxpayer. The IRS created the Taxpayer Bill of Rights, which outlines 10 fundamental rights. In this post, we’ll focus on three that are especially relevant when you’re facing IRS penalties:

• The Right to Pay No More than the Correct Amount of Tax
• The Right to Challenge the IRS’s Position and Be Heard
• The Right to Appeal an IRS Decision in an Independent Forum

If you believe a penalty was wrongly assessed—or that you had a good reason for not filing or paying on time—you have every right to request penalty relief. You can submit a penalty abatement request—either in writing or over the phone (for certain cases)—and make your case for relief. But doing this alone can be time-consuming and confusing. That’s where we come in.

1. IRS Penalty Abatement Due to IRS Error

Sometimes the IRS makes a mistake such as:

• A filing extension wasn’t processed
• A credit was incorrectly applied
• A penalty was wrongly calculated

If your penalty stems from an IRS error, we can submit a correction request on your behalf with evidence (such as transcripts, notices, and return history). If approved, the IRS will reverse the penalty and may even issue a refund.

2. First-Time Penalty Abatement (FTA)

The First-Time Penalty Abatement program gives eligible taxpayers a one-time pass on certain penalties. Think of it as the IRS saying, “We all make mistakes.” Although it’s called First-Time Penalty Abatement, the IRS may grant it multiple times if you remain compliant and meet the criteria.

Eligible penalties include:

• Failure to File (FTF)
• Failure to Pay (FTP)
• Failure to Deposit (FTD)

FTA Eligibility Requirements:

• No penalties in the past three years for the same tax type
• All returns are currently filed
• Any tax owed is paid or in a payment plan

FTA Request Options:

• Phone Request: Fastest method; results typically appear within 3 weeks
• Written Request: Use Form 843 or a letter; response usually within 2–3 months

IRS Response Letters:

• Approval: Letter 3502C (Business), Letter 3503C (Individual), CP21B (refund notice)
• Denial: Letter 853C

3. Reasonable Cause Penalty Relief

If you missed a deadline due to circumstances outside your control, you may qualify for Reasonable Cause Penalty Relief. This form of IRS penalty abatement considers whether you acted with “ordinary business care and prudence.”

Valid Reasons May Include:

• Natural disasters (fire, flood, hurricane)
• Inaccessible records
• Death, serious illness, or absence of a taxpayer or close family member
• System errors or e-filing issues
• Incorrect advice from the IRS or a tax advisor
• Financial hardship
• Ignorance of tax law
• Unintentional oversight or mistake

Eligible Penalties:

• FTF, FTP, and FTD (when FTA isn’t an option)
• Accuracy-related penalties
• Estimated tax penalties
• Late W-2/W-3 filings

Timeline:

• Initial Request: 6–12 weeks for IRS review
• Appeals Process: 3–9 months or longer if denied

We prepare comprehensive, well-documented requests to increase the likelihood of approval.

4. Trust Fund Recovery Penalty (TFRP) Relief

Businesses that fail to deposit employee payroll taxes may face the Trust Fund Recovery Penalty (TFRP) — a severe civil penalty assessed personally on “responsible parties.”

What We Do:

• Conduct an interview using Form 4180 to determine your role
• Review control over payroll, hiring, and payments
• Evaluate whether your actions were willful
• If you’re not the responsible party, we’ll request removal of the penalty

Timeline:

• After receiving Letter 1153, you have 60 days (or 75 if abroad) to agree or appeal

5. Voluntary Classification Settlement Program (VCSP)

If you’ve misclassified workers as independent contractors instead of employees, the Voluntary Classification Settlement Program (VCSP) can help you correct it with reduced penalties.

You May Qualify If:

• You consistently treated workers as non-employees
• You filed all required 1099s for the past three years
• You’re not under audit for worker classification

What VCSP Offers:

• Reclassify workers going forward
• Pay only 10% of the tax liability for the most recent year
• No interest or penalties
• Protection from employment tax audits of prior years

How It Works:

• File Form 8952 at least 120 days before the effective date you want to begin treating workers as employees
• Sign a closing agreement with the IRS

Why Work With Us?

Tax laws are complex. The IRS isn’t always easy to communicate with. That’s where we come in.

Whether you’re facing income tax, payroll tax, or employment tax penalties, we evaluate your case, explain your options, and file everything for you. Our firm helps individuals and small businesses remove penalties, negotiate IRS relief programs, and regain peace of mind.

Here’s What We’ll Do:

• Analyze your IRS transcripts and penalty notices
• Recommend the best penalty relief option: FTA, Reasonable Cause, TFRP relief, or VCSP
• Prepare all forms, letters, and documentation
• Communicate directly with the IRS so you don’t have to

Related Posts You Might Find Helpful:

IRS Income Tax Penalty Notices: What Individuals and Businesses Need to Know

IRS Payroll Tax Penalty Notices: What Businesses Need to Know

Conclusion: Let a Tax Professional Handle Your IRS Penalty Relief

If you’re feeling stressed by IRS penalty letters or tax notices, you’re not alone. Our CPA firm is here to help you reduce or remove those penalties through IRS penalty abatement strategies that work.

Let us handle the paperwork and phone calls while you focus on what matters most—getting back on track financially.

Ready to Resolve Your IRS Penalties?