Penalty abatement is the IRS removing or reducing penalties that were added to your tax bill. The tax itself doesn't go away, but the penalties (which can add 25% to 50% to what you owe) can be partially or fully waived if you meet certain criteria.

The most common penalties:

Failure-to-file penalty: 5% of the unpaid tax per month, up to 25% maximum. Failure-to-pay penalty: 0.5% of the unpaid tax per month, up to 25% maximum. On a $20,000 tax debt, the combined penalties can add $5,000 to $10,000 over time. Getting those removed makes a significant difference.

First Time Penalty Abatement (FTA): This is the easiest to qualify for and the one the IRS grants most often. You qualify if you've filed all required returns, you've had no penalties for the prior 3 tax years, and you're current on any payment plan or have paid the tax in full.

You can request FTA by calling the IRS directly at 1-800-829-1040. For many people, this is a single phone call that can save thousands. You don't need to hire anyone. If the agent on the phone can verify your eligibility, they can apply it immediately. If the tax year in question is the only year you've had issues, you'll likely get approved on the spot.

Reasonable Cause abatement: If you don't qualify for FTA, you can request penalty removal based on "reasonable cause." The IRS evaluates these case by case. Examples that often work: a serious illness or death in the family, a natural disaster, reliance on bad advice from a tax professional (you'll need documentation), fire or theft of records, or IRS errors that caused the late filing or payment.

For reasonable cause, submit a written request (Form 843 or a letter) with supporting documentation. Medical records, insurance claims, a letter from your previous tax preparer, or FEMA disaster declarations all strengthen your case.

Statutory exceptions: Certain penalties can be removed by law. For example, if you're an active-duty military member in a combat zone, penalties and interest are suspended for the duration of your service plus 180 days.

What penalty abatement won't do: It removes penalties, not interest. Interest on the unpaid tax continues to accrue and is rarely waived (the IRS can only abate interest caused by IRS errors or delays). Still, removing the penalties reduces your principal balance, which means less interest going forward.