How Do You Get the IRS to Forgive Penalties and Interest?

The IRS can abate (remove) penalties through three official paths: First-Time Penalty Abatement (FTA) for taxpayers with a clean compliance history, Reasonable Cause relief for genuine hardships, and Statutory Exceptions for disasters or IRS errors. Interest abatement is extremely rare — the IRS only reduces interest that accrued on a penalty that gets abated; the interest on your underlying tax debt almost always stands. All three penalty abatement paths are free to use yourself — you do not need to pay a tax-relief firm to access them. **ClearValue Lending is not a CPA or tax advisor — consult a qualified tax professional for advice specific to your situation.**

ClearValue Lending is not a CPA, tax advisor, or tax-relief firm. This is general financial education. Consult a qualified tax professional for advice on your specific situation.

If you've just received an IRS penalty notice, two questions are natural: can I get this penalty removed, and can I get the interest removed too? Brian's companion video above walks through the mechanics in detail. The short version: penalties can often be abated through official IRS programs — for free. Interest almost never can.

Interest and penalties are different — and the IRS treats them differently

The IRS can and does abate penalties under the three paths below. Interest is a different matter. Under Internal Revenue Code §6404, the IRS has very limited authority to abate interest — only the interest that specifically accrued on a penalty that gets successfully abated. The interest on your underlying tax debt (the tax you actually owe) continues to accrue at the current federal rate until paid. Don't let a tax-relief firm charge thousands of dollars promising 'interest forgiveness' — the IRS does not generally forgive interest on tax balances.

Path 1: First-Time Penalty Abatement (FTA) — the fastest track

First-Time Penalty Abatement is an administrative waiver the IRS grants once — as a reward for having a clean compliance history. It covers failure-to-file, failure-to-pay, and failure-to-deposit penalties. It does NOT reduce your underlying tax or the interest on that tax.

Who qualifies: You must have (a) filed all required returns or filed a valid extension, (b) paid or arranged to pay all taxes currently due, and (c) had no penalties assessed in the prior three tax years (the three years preceding the year you're requesting relief for).
How to request: Call the IRS at the number on your notice (typically 800-829-1040 for individuals). State clearly: "I am requesting First-Time Penalty Abatement under Revenue Procedure 2005-18." The IRS representative will check your compliance record and, if you qualify, can grant FTA on the spot or within a few weeks in writing.
Alternative — written request: Send a letter to the address on your notice stating your name, TIN, the tax period, the penalty amount, and that you're requesting FTA. Attach evidence of your clean compliance history if available.
Cost: Free. You do not need to file any special IRS form and you do not need a third party.
One-time use: FTA is available once per tax period type. Using it for a failure-to-pay penalty does not prevent you from requesting it for a future failure-to-file penalty, but you can't stack it on the same year.

Path 2: Reasonable Cause — for genuine hardship

If FTA doesn't apply (you had a penalty in the prior three years, or the penalty type isn't covered), you can request penalty abatement based on Reasonable Cause. The IRS grants this when the failure was due to circumstances beyond your control — and you exercised ordinary business care and prudence but still couldn't comply.

Qualifying circumstances include: serious illness or death of the taxpayer or an immediate family member, natural disaster, destruction of records by fire or flood, inability to determine your tax liability due to circumstances beyond your control, reliance on erroneous IRS advice (documented), or acting on advice from a competent tax professional (documented).
What does NOT qualify: forgetting, being too busy, inability to pay (by itself), or generalized financial hardship without an underlying cause beyond your control.
How to request: Submit Form 843 (Claim for Refund and Request for Abatement) to the IRS service center that processed your return. Include a clear written explanation of the circumstances, documentation (medical records, death certificates, disaster declarations, professional correspondence), and the specific penalty amounts you're requesting be abated.
Processing time: Form 843 requests typically take 3–6 months. The IRS may request additional documentation.
Cost: Free to file Form 843 yourself. A CPA or Enrolled Agent can help document the case — their fees are typically a few hundred to a few thousand dollars, far less than a tax-relief firm's upfront retainer.

Path 3: Statutory Exceptions — specific circumstances in the law

Congress has written penalty exceptions directly into the tax code for specific situations. These include:

Federally declared disasters: IRS extends filing and payment deadlines for taxpayers in federally declared disaster areas. Penalties for the covered period are automatically waived or abated. Check IRS.gov for the current list of declared disaster relief areas.
Military service: Service members in combat zones receive automatic extensions of IRS deadlines under the Servicemembers Civil Relief Act. Penalties for the covered period generally don't apply.
IRS error: If the IRS provided incorrect written advice that caused you to incur a penalty, you can request abatement under IRC §6404(f). Document the specific IRS written advice you relied on.
First-year errors on new business: Some penalties (particularly estimated tax penalties for new businesses) have statutory exceptions. A tax professional can identify which apply to your specific situation.

Interest: what can (and can't) be abated

The IRS's authority to abate interest is narrow. Under IRC §6404, the IRS can reduce interest only in limited circumstances: (1) ministerial or managerial IRS error that delayed the assessment, (2) interest attributable to a penalty that gets abated (the interest on the penalty disappears when the penalty disappears), and (3) combat zone service. The current IRS underpayment interest rate is 7% per year, compounded daily — this accrues on your tax balance from the original due date until paid in full, regardless of penalty abatement. Setting realistic expectations here matters: if a firm promises to eliminate your 'interest burden,' they are almost certainly referring to the interest on abated penalties — not the interest on your actual tax debt, which will continue to accrue.

Tax-relief firm warning — the FTC is explicit here

Radio and TV ads regularly promise to 'settle your IRS debt for pennies on the dollar' or 'eliminate your tax burden.' The FTC warns that many of these firms charge upfront fees of $4,000–$10,000+ to apply for programs you can access directly through IRS.gov at no cost. Red flags the FTC identifies: demanding large upfront fees before reviewing your finances, guaranteeing specific outcomes, pressuring you to sign quickly, refusing to put their service agreement in writing. The IRS penalty abatement process is self-service. Taxpayer Advocate Service help is free. A licensed CPA or Enrolled Agent (EA) — held to ethical standards by their licensing body — is the right professional to hire if you need expert help. See FTC guidance at consumer.ftc.gov for the full list of tax-relief red flags.

Taxpayer Advocate Service — free for unresolved cases

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS funded by Congress to help taxpayers whose issues haven't been resolved through normal IRS channels. If you've submitted a penalty abatement request, waited months for a response, and are now facing imminent enforcement action — TAS can intervene. TAS is free. Find your local office at taxpayeradvocate.irs.gov.

Primary IRS sources

The IRS provides First-Time Penalty Abatement as an administrative waiver for taxpayers with a clean compliance history (no penalties in the prior three tax years, all returns filed, tax paid or arranged). It covers failure-to-file, failure-to-pay, and failure-to-deposit penalties and can be requested by phone or in writing. — IRS — Penalty Relief for Reasonable Cause (and administrative waiver overview)
Reasonable Cause penalty relief is available when the taxpayer exercised ordinary business care and prudence but could not comply due to circumstances beyond their control — illness, death in family, natural disaster, or reliance on erroneous IRS advice. Form 843 is the standard filing vehicle. — IRS — Penalty Relief Due to Reasonable Cause
The IRS can abate interest accrued due to unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act, or interest on penalties that are themselves abated. Interest on the underlying tax liability generally continues to accrue until paid. — IRS Topic 653 — IRS Notices and Bills, Penalties, and Interest Charges
The IRS interest rate for underpayments for individuals is 7% per year, compounded daily (federal short-term rate + 3 percentage points), as of Q2 2025. This rate changes quarterly. — IRS — IR-2025-29, Interest Rates Remain the Same for the Second Quarter of 2025
The FTC warns consumers that many tax-relief companies charge large upfront fees ($4,000–$10,000+) to apply for programs available directly from the IRS for free or at low cost. Red flags include guarantees of specific outcomes, large upfront fees before reviewing finances, and high-pressure tactics. — FTC — Tax Relief Companies

Frequently asked questions

Will the IRS waive interest on my back taxes? Almost never. The IRS can only reduce interest on penalties that get abated, or in narrow cases where IRS errors caused the delay. The interest on your underlying tax debt (the amount you actually owe) continues at 7% per year, compounded daily, until fully paid. This is one reason why resolving an IRS balance quickly — even through a payment plan — is better than waiting.
How do I request First-Time Penalty Abatement? Call the phone number on your IRS notice (or 800-829-1040 for individuals). Tell the representative you're requesting First-Time Penalty Abatement under Revenue Procedure 2005-18 for the specific penalty and tax year. Have your tax records available. The IRS will check your compliance history. If you prefer written requests, mail a letter to the IRS service center that issued the notice with your name, TIN, the tax period, the penalty amount, and the reason for your request.
What counts as Reasonable Cause for penalty abatement? The IRS looks for circumstances beyond your control where you exercised ordinary care but still couldn't comply. Strong examples: documented serious illness (yours or an immediate family member's), a death in the family close to the filing deadline, a federally declared disaster that destroyed your records, or documented reliance on erroneous written advice from the IRS or a qualified tax professional. Being busy, forgetting, or cash flow problems (without an underlying cause) generally don't qualify.
Should I hire a tax-relief firm? For most people, no. First-Time Penalty Abatement is a phone call. Reasonable Cause requires Form 843 and documentation — which you can prepare yourself or with help from a licensed CPA or Enrolled Agent for a fraction of what tax-relief firms charge. The FTC has extensively documented the tax-relief industry's pattern of charging large upfront fees for services you can largely self-service at IRS.gov. If you need professional help, hire a CPA or EA directly — they are licensed, held to ethical standards, and their fees are typically more transparent.
How much does it cost to abate penalties yourself? Nothing, except your time. FTA requires a phone call or letter with no filing fee. Reasonable Cause requires Form 843, which is free to file. The IRS's Taxpayer Advocate Service is free. The only costs arise if you hire a tax professional — a CPA or EA typically charges a few hundred to a few thousand dollars for this type of work, depending on complexity, which is a fraction of typical tax-relief firm retainers.

Key takeaways

Penalties can be abated — interest almost never can. The IRS only reduces interest tied to penalties that get abated; your underlying tax interest keeps running.
First-Time Penalty Abatement (FTA) is the fastest path: one call to 800-829-1040, no form, no fee. It requires a clean compliance record in the prior three tax years.
Reasonable Cause covers genuine hardships — illness, disaster, IRS error — but requires documentation and Form 843. Bar is higher than FTA.
The FTC warns that tax-relief firms charge $4K–$10K+ for programs you can access free at IRS.gov. Use IRS tools first; hire a licensed CPA or EA if you need professional help.
Taxpayer Advocate Service (TAS) is free and independent. Use it if IRS channels aren't working and enforcement is imminent.

ClearValue Lending is not a tax advisor

ClearValue Lending is not a CPA, Enrolled Agent, or tax-relief firm. The information on this page is based on published IRS guidance and FTC consumer resources and is provided for general educational purposes only. Your specific situation — penalty type, compliance history, and financial circumstances — determines which options are available to you. Consult a qualified tax professional (CPA or Enrolled Agent) before making decisions about IRS penalty or interest disputes.