If the IRS has charged you a penalty for filing, paying or depositing late, you may not have to pay it. The IRS has long waived these penalties for people with a clean record and is now making that automatic for newer returns.
This guide explains the two waivers, reasonable cause relief, the penalty rates, how to ask and what happens to interest, using the IRS penalty relief pages and Topic 653.
| Route | Who it fits | What you do |
|---|---|---|
| Automatic Exemption from Penalty (AEP) | Eligible original returns for 2025 tax year onward and 2026 quarterly returns onward, with a timely compliance history | Nothing: the IRS does not assess the penalty and sends a letter explaining the relief |
| First Time Abate (FTA) | Taxpayers with three years of timely compliance, for periods AEP does not cover | Call the number on your notice or send a written statement or Form 843 |
| Reasonable cause | Anyone who acted with ordinary care and prudence but still could not file or pay on time | Call or write with the facts and supporting documents |
The IRS says the most common administrative waiver, First Time Abate, applies to taxpayers with three years of timely compliance history and is transitioning to Automatic Exemption from Penalty starting summer 2026. If you do not qualify for either, you may ask for relief based on reasonable cause, and the IRS will notify you of its decision.
Under AEP, if you file or pay late in the current year but filed on time and paid the tax due for the three prior years (or 12 consecutive quarters for quarterly filers), you are not assessed a penalty. It covers the Form 1040, 1065 and 1120 series, among others, beginning with 2025 tax year returns and 2026 quarterly returns. The IRS applies it when your original return finishes processing, does not assess failure-to-file, failure-to-pay or failure-to-deposit penalties and sends a letter. You still owe unpaid tax, interest and any other penalty not covered. If a notice shows an assessed penalty but you believe you qualified, contact the IRS.
| First Time Abate | Automatic Exemption (AEP) | |
|---|---|---|
| Applies to | Eligible earlier years and periods, plus periods AEP does not consider | 2025 tax year and 2026 quarterly returns, and all future periods |
| How granted | Not automatic: you contact the IRS | Automatic: no action needed |
| Penalty assessment | Assessed first, then later removed | Not assessed |
| Failure-to-pay penalty | May continue to accrue until the tax is fully paid | Does not accrue on unpaid tax |
You need a timely compliance history: the same return type was timely filed for the prior three years (or 12 consecutive quarters), and either no penalty (other than the estimated tax penalty) was assessed or any penalty was later abated for reasonable cause or IRS error. Businesses also need no failure-to-deposit abatement four or more times in that period and no penalty for avoiding the Electronic Federal Tax Payment System. The relief does not cover returns filed once or infrequently (event-based filing requirements), the Daily Delinquency Penalty or information reporting that depends on another filing. See our Form 941 guide for payroll deposit rules.
| Usually accepted | Usually not accepted by itself |
|---|---|
| Fires, natural disasters or civil disturbances | Reliance on a tax professional |
| Inability to get records | Lack of knowledge of the filing rules |
| Death, serious illness or unavoidable absence of you or immediate family | Mistakes and oversights |
| System issues that delayed a timely electronic filing or payment | Lack of funds on its own |
The IRS decides reasonable cause case by case from all facts and circumstances, and it does not apply to certain penalties such as the estimated tax penalty. You must show you exercised ordinary care and prudence and were still unable to file or pay on time. For accuracy-related penalties the IRS considers your efforts to report the correct tax, the complexity of the issue, your education and experience and any advice you sought. Include supporting records, for example a doctor's letter with start and end dates for an illness, documentation of a disaster, copies of letters and receipts.
The IRS may remove some penalties over the phone: call the number on your notice and have the notice, the penalty, and your reasons ready. If you ask for reasonable cause and the IRS decides you qualify for first time abate, it applies that instead. If it cannot approve the relief by phone, send a written request or Form 843. If your request is denied, the IRS notice explains how to appeal.
| Penalty | Rate (IRS Topic 653) |
|---|---|
| Failure to pay | One-half of one percent a month or part of a month, maximum 25%; one-quarter of one percent in months an installment agreement is in effect if you filed on time and requested it; one percent after 10 days from a notice of intent to levy |
| Failure to file | Usually five percent a month or part of a month, maximum 25% |
| Minimum late-filing penalty (over 60 days late) | Lesser of $525 (returns required to be filed in 2026) or 100 percent of the tax owed; for returns required to be filed in 2027 the IRS has announced $535 (Rev. Proc. 2025-32) |
Our illustration: $8,000 of tax unpaid for 6 months at one-half of one percent a month is a $240 failure-to-pay penalty, and the cap of 25% on $8,000 is $2,000. The IRS applies payments to tax first, then penalty, then interest, so paying quickly stops the penalty growing. A payment plan can lower future penalties (see our IRS payment plan guide).
The IRS charges interest on penalties, and it automatically reduces or removes the related interest when it reduces or removes a penalty. Otherwise the IRS does not generally abate interest, which keeps accruing until tax, penalties and interest are paid in full; the rate is set quarterly at the federal short-term rate plus 3 percent. If you cannot settle the debt, see our offer in compromise guide and federal tax lien guide, and if the issue is a spouse's error see our innocent spouse relief guide.
IRS: Penalty relief due to First Time Abate or other administrative waiver, IRS: Penalty relief for reasonable cause, IRS Topic 653: IRS notices and bills, penalties and interest charges.