The IRS has usually forgiven penalties charged on a tax return if it is the first time the taxpayer has ever had the penalty imposed.  This “first time abatement” policy has worked well for taxpayers who make a one-time error that results in a penalty.

However,  changes to this policy have just been announced.  The IRS can now refuse to abate first-time penalties if all prior tax returns have not been filed, and all prior taxes have not been paid or put onto a payment plan.

The abatement also only relates to one period, so if a number of late returns are filed and penalized all at once, only one year of penalties can be abated.

Lastly, first-time penalty relief does not apply to Estate Tax (706), Gift Tax (709), or Corporation Income Tax (1120) returns.  It also does not apply if an S-Corporation return (1120S) was late filed in the past but not penalized.

These rules make it more difficult to get penalties abated, but it is always worth asking the IRS to do so.  Working with someone who knows how the process works can improve your odds of getting a favorable result.