Penalty abatement refers to IRS forgiveness or relief from penalties related to a tax return for a particular period. The main penalty abatement option would be first-time abatement, which is simple enough that most taxpayers could do it on their own without their attorney. A taxpayer can request a first-time abatement over the phone with the IRS. However, if they must provide reasonable cause, that tends to be more fact-based and requires substantiation documents.

They must write a penalty abatement letter that explains how their actions were something a reasonable person would have done in the situation. They must include a copy of the IRS letter that issued the penalty and file a Form 843 Request for Penalty Abatement to the IRS office that issued the penalty.

In helping you resolve a larger tax controversy, Pontius Tax Law can help you apply for penalty relief for unfiled taxes in Washington DC.

Reasonable Cause for Abatement

The IRS has determined that reasonable cause exists when a taxpayer exercises ordinary business care and prudence towards complying with their tax obligations. For example, the Internal Revenue Manual gives several life situations that might result in an abatement of penalties, such as:

  • Caring for a loved one
  • Serious illness
  • Death
  • A fire or natural disaster
  • COVID-19

If a taxpayer were to receive erroneous advice from a tax professional or the IRS, they could request reasonable cause based upon that.

The taxpayer may need documents to show they were exercising ordinary business care and prudence. This could include hospital or court records, letters from a physician to establish illness or incapacitation with specific start and end dates, documentations of natural disasters, or other events that prevented compliance.

First-Time Abatement Policy

If a taxpayer was assessed a penalty due to the failure to file or pay their taxes, they could utilize the IRS first-time penalty abatement policy – but only if they had no civil penalties in the prior three years. If a taxpayer has been in full compliance for the last three years, the IRS wants to encourage good behavior and, in limited situations, may abate penalties in acknowledgement of the good behavior.

Taxpayers have the right to file an appeal after a denial of penalty abatement. They would do this by filing an appeal within 30 days of the rejection letter, also known as a notice of disallowance.

Requesting a review or abatement of penalties based upon reasonable cause can take two to three months for the initial determination. If an appeal is needed, it may be another six to twelve months. If the IRS denies the request for penalty abatement, the penalties will remain in place and may continue to accrue interest.

What Are Underreporting Notices?

Underreporting notices are typically sent by the Underreporter’s Unit of the IRS. It is largely computer-generated, and the most common underreporting notice is a CP2000 which propose changes to income, credits, and deductions, based upon third-party information provided to the IRS and the discrepancy in the tax return.

An underreporting notice will lead to one of two outcomes. One outcome is the taxpayer might owe additional taxes, penalties, and interest. However, if the taxpayer can prove the tax return they filed was correct (using substantiation documents as proof), then that would be called a ‘no change’ from the IRS.

How is This Notice Applied?

The IRS will typically apply payments in a manner that best serves their needs. They will address the oldest periods first because of the collection statute of limitations. A lawyer may recommend that taxpayers write their Social Security number in the memo line of their check and include where the payment is to be applied – for example the year and the tax form.

The IRS notices will also provide a voucher that identifies how much is owed and where it should be sent. A taxpayer should include that voucher with the payment and make a copy of whatever they send to the IRS with a tracking number to ensure that they got proof of delivery. They should also have copies of both sides of the checks.

Taxpayers can also make payments electronically by going to This electronic confirmation is recommended because there is less chance that the check gets delayed, lost in the mail, applied to another taxpayer, or applied to the wrong year or form.

Learn if You Qualify for Penalty Relief from Unfiled Taxes by Calling a DC Attorney

If you were assessed significant penalties by the IRS, or if you no longer qualify for first-time relief, a trustworthy tax lawyer could offer an assessment of your options. Reach out to us and discuss the possibility of penalty relief for unfiled taxes in Washington DC.

Attorney John Pontius

Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC,  Rockville, MD, Bethesda, MD, Fairfax, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.

Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.

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