Does the IRS Ever Waive Penalties and Interest?

Having to deal with the IRS can be stressful, especially if you owe money and have to pay penalties and interest. It’s a good thing that the IRS might be willing to waive these fees sometimes. You can get the IRS to forgive fines and interest by following these steps.

When Can the IRS Waive Penalties?

The IRS understands that sometimes taxpayers make honest mistakes or face circumstances beyond their control that prevent compliance. In these cases, they may waive certain penalties through “reasonable cause” relief.

Some common situations where reasonable cause penalty relief may apply include

• Not filing/paying due to serious illness or incapacity
• Relying on incorrect advice from the IRS
• Facing a disaster such as severe weather, fire, or theft
• Experiencing the death or serious illness of an immediate family member

First-time abatement is another option if it’s your first penalty. If you have been good with the IRS for the last three tax years, they may not charge you any penalties for failing to file, pay, or deposit your taxes.

There are also some statutory exceptions written into the tax code where penalties can be waived automatically if you meet specific criteria. For example, if you are a victim of identity theft or serving in a combat zone.

How to Request IRS Penalty Relief

If the IRS sends you a notice with a penalty charge, read it carefully to find out how to ask for relief. Typically, you’ll either need to:

• Call the number listed and explain why the penalty should be waived. Have details like the notice date, penalty amount, and reason for reasonable cause relief ready.

• Submit Form 843 “Claim for Refund and Request for Abatement” with supporting documentation by mail if you can’t resolve over the phone.

When requesting reasonable cause relief, be prepared to provide documentation like medical records, police reports, or proof of natural disaster to support your claim.

Can the IRS Waive Interest Charges Too?

Tax bills and fines that aren’t paid by the due date earn interest from the date they were due until they are paid in full. The IRS is required by law to charge interest, but they can waive interest that builds up because of mistakes or delays that were not their fault.

To request interest abatement, submit Form 843 detailing when and how the IRS error or delay occurred that led to excess interest charges. Interest related to penalties will also be reduced or removed if the penalty is waived.

Strategies for Getting IRS Penalty and Interest Relief

• Act fast – There is a limited window to request abatement on penalties and interest.

• Be thorough – Clearly explain your circumstances and provide supporting documentation.

• Remain compliant – Continue filing and paying on time to avoid new penalties.

• Seek help if needed – Consider hiring a tax pro or advocate to negotiate with the IRS on your behalf.

• Don’t give up – If your initial request is denied, you can appeal the decision.

Can the IRS Reduce Tax Debt?

If you can’t pay your tax bill in full, the IRS may be able to offer relief by:

• Placing you in “non-collectible” status temporarily if facing economic hardship
• Offering a payment plan to pay over time
• Settling for less than the full amount owed through an Offer in Compromise

Key Takeaways

• The IRS may waive penalties for reasonable cause and first-time abatement.

• Interest can be reduced if caused by IRS errors or delays.

• Act quickly, communicate cooperatively, and provide documentation.

• Explore payment relief options if you owe but can’t pay in full.

While not guaranteed, taking the right steps can help get IRS penalties and interest waived or reduced, saving you money. Don’t assume the IRS won’t work with you – take advantage of penalty and interest relief opportunities when eligible.