If the IRS has recently claimed that you owe a penalty for late filing, late payment, or missed employment tax deposits, pause before making any payment. You may not have to pay that penalty at all.

The IRS often imposes steep penalties for filing tax returns late, failing to pay taxes on time, or not depositing employment taxes correctly. However, several strategies can help you get those penalties removed—and in some cases, even refunded if you have already paid them.

Common IRS Penalties and Their Impact

• Late filing penalty: For individual or C corporation returns, this can be up to 5% of the unpaid tax for each month the return is late, maxing out at 25%. Partnerships and S corporations can incur penalties of $245 per partner or shareholder per month.
• Late payment penalty: This penalty is generally 0.5% of the unpaid tax per month, maxing out at 25%.
• Failure to deposit employment taxes: This penalty ranges from 2% to 10%, depending on how late the deposit was.

Strategies for Relief

Here are a few ways to potentially avoid or reduce these penalties:

• First-time abate: If this is your first time receiving a penalty—or your first time in over three years—you may be eligible for a “first-time abate.” This is one of the easiest and most common ways to remove a penalty.
• Partnership relief: If your business is a partnership with 10 or fewer partners, and all partners filed their tax items on time, you may qualify under Revenue Procedure 84-35.
• Reasonable cause: You can request penalty relief by showing there was a reasonable cause, such as illness, natural disasters, or significant life events that impacted your ability to meet deadlines.

Next Steps

If you believe any of the penalties you’re facing may qualify for relief, you may be able to remove those penalties with a simple phone call. Using the right approach and trigger words when speaking to the IRS can make all the difference.

If you have already paid the penalties, you can use IRS Form 843 to file for a refund if you do so within three years of filing the return or within two years of paying the penalty.