Got Filing Penalties

IRS Penalties: What They Are — and How to Make Them Go Away

Getting a notice from the IRS that includes the word penalty is never fun. 😬 But before you panic, it helps to know what penalties the IRS actually assesses, why they happen, and — most importantly — when they can be removed.

Let’s break it down.

Common IRS Penalties You Might See

The IRS issues penalties for a variety of compliance issues. The most common ones include:

• Failure to File – You didn’t file your tax return by the due date (including extensions).

• Failure to Pay – You filed, but didn’t pay the tax owed by the due date.

• Failure to Deposit – Applies mainly to businesses that didn’t timely deposit payroll or other required taxes.

• Accuracy-Related Penalties – Triggered when income is underreported or deductions/credits are claimed incorrectly.

• Erroneous Claim for Refund or Credit – Happens when a refund or credit is claimed for an excessive amount, and reasonable cause doesn’t apply.

• Information Return Penalties – For failing to file or properly furnish required forms like 1099s or W-2s.

• Underpayment of Estimated Tax – Applies when individuals don’t pay enough estimated tax throughout the year or pay it late.

These penalties can stack quickly — especially failure-to-file and failure-to-pay — making a manageable tax bill feel overwhelming.

Here’s the Good News: Penalties Are Often Waivable

Many taxpayers don’t realize this, but IRS penalties are not always permanent.

The IRS allows penalty abatement when certain criteria are met, including reasonable cause or the powerful (and underused) First Time Penalty Abatement (FTA).

First Time Penalty Abatement (FTA)

You may qualify for FTA if:
✔️ You had no penalties for the prior three tax years
✔️ All required returns are filed (or extensions requested)
✔️ The tax due has been paid or is arranged to be paid

FTA can remove penalties for:

• Failure to file

• Failure to pay

• Failure to deposit

And it’s available once every three years, as long as you meet the requirements.

Final Thoughts

IRS penalties feel harsh — but they’re not always final. If you’ve been compliant in the past or had legitimate circumstances, there’s often a path to relief.

Before you just pay the penalty and move on, it’s worth asking:
“Can this be abated?”

👉 If you’ve received an IRS penalty notice and want help reviewing abatement options, book a call with Lisa Brugman, EA & Associates. Sometimes the fastest tax savings come from removing penalties you never should’ve owed in the first place.