A reduction or removal of a tax penalty, usually granted when a taxpayer shows a valid reason for noncompliance or qualifies for an IRS administrative waiver.

Penalty abatement most often comes up when the IRS adds charges for filing late, paying late, or failing to deposit taxes on time. The tax itself usually still has to be paid, and interest may continue to apply, but the penalty portion can sometimes be erased. Common grounds include reasonable cause - such as serious illness, records destroyed by fire, or other circumstances outside the taxpayer's control - and the IRS's First Time Abate administrative relief, which may apply if the taxpayer has a clean recent compliance history. Federal penalty rules are tied to the Internal Revenue Code, including 26 U.S.C. § 6651 for failure-to-file and failure-to-pay penalties.

In real life, abatement can make a tax bill much more manageable. A late-filing penalty can grow quickly, and getting it removed may save hundreds or thousands of dollars. It can also affect whether a taxpayer can realistically enter an installment agreement, pursue an offer in compromise, or avoid more aggressive IRS collection action.

Timing matters. A taxpayer generally asks for relief by responding to an IRS notice, calling the IRS, or filing a written request such as Form 843. Good records help; "everything was chaotic" is understandable, but the IRS usually wants more than a grim shrug.