Tax Penalty Abatement | Tax Attorneys in Roseville, CA

IRS and California Tax Penalties

The IRS imposes penalties for a wide range of compliance failures, including failure to file a return on time (IRC § 6651(a)(1)), failure to pay tax when due (IRC § 6651(a)(2)), accuracy-related penalties for substantial understatements or negligence (IRC § 6662), and failure to make payroll tax deposits on time (IRC § 6656). These penalties accrue quickly and can add 20–25% or more to the underlying tax liability. California's FTB and CDTFA impose parallel penalty structures for state tax violations.

First-Time Penalty Abatement

The IRS offers administrative penalty relief under a policy known as First-Time Abatement (FTA), which allows a taxpayer with a clean compliance history to request removal of certain penalties without having to prove a specific reason for non-compliance. FTA is available for failure-to-file, failure-to-pay, and failure-to-deposit penalties. To qualify, the taxpayer must have no penalties in the three preceding years and must be current on all filing and payment obligations.

First-Time Abatement is one of the most underutilized forms of relief available to taxpayers — and one of the most straightforward when the eligibility criteria are met.

Reasonable Cause Penalty Relief

For taxpayers who do not qualify for FTA, penalties may still be reduced or eliminated if the taxpayer can demonstrate reasonable cause — meaning the failure was due to circumstances beyond their control and they exercised ordinary business care and prudence. Circumstances that may support reasonable cause include serious illness, natural disasters, reliance on incorrect advice from a tax professional, or destruction of business records.

The standard for reasonable cause is fact-specific, and the IRS evaluates requests on a case-by-case basis. A well-documented, clearly written reasonable cause statement is essential.

Statutory and Regulatory Exceptions

Certain penalties may also be waived under specific statutory provisions or IRS regulations. For example, the accuracy-related penalty can be avoided if the taxpayer can demonstrate substantial authority for the tax position taken, or if the position was adequately disclosed.

Our tax attorneys evaluate all available grounds for penalty relief, prepare and submit abatement requests, and, if necessary, appeal denials through the IRS administrative process.