One phone call clears it, unless it is the penalty you actually got

Figures relate to tax year 2025-26 (UK) · 2025 (US)

A late filing penalty arrives and you assume a long argument lies ahead. Letters, explanations, evidence of why you missed the date.

For one specific kind of charge, none of that is necessary. A waiver exists that removes it on request, with no reason required at all.

The catch is its scope. First time penalty abatement covers the ordinary domestic penalties and deliberately excludes the international ones, which are precisely the charges an American in Britain tends to receive.

Key takeaways

• Penalty abatement removes late filing and late payment charges.
• No explanation is required, only a clean recent record.
• A clean record means no penalties in the previous three years.
• It never covers foreign company, trust or account penalties.
• Interest continues regardless of whether the charge goes.
• You can usually get penalty abatement on a single call.
• Use it on the costliest year rather than the first letter.

What is first time penalty abatement?

An administrative waiver the IRS applies to certain penalties where a taxpayer has a clean recent compliance history. It is a matter of internal policy rather than statute. According to IRS guidance on penalty relief, no reasonable cause argument is needed for it at all.

The absence of an explanation is what makes it unusual.

You are not arguing you had an excuse. You are pointing at your record.

Which penalties does it cover?

Failure to file a return, failure to pay the tax, and failure to make a required deposit. Those three charges account for most ordinary penalty notices. A single request can remove all three for the same year where they appear together.

Our guide to US tax deadlines for expats covers how the dates work.

For 2025 the late filing charge runs at 5 per cent a month up to 25 per cent.

Which penalties does it never cover?

The international information return ones, which is the heart of the problem for anybody abroad. Missed foreign company forms, foreign trust forms and foreign account reports all sit outside this waiver. So do accuracy related penalties on understated tax.

Those are the charges that run to $10,000 a year and upwards.

The easy relief and the expensive penalties simply do not overlap.

A worked example

Take an illustrative example. An American in Leeds files her 2024 return eight months late in 2025, owing $6,000 of tax.

The late filing and late payment charges together come to roughly $1,800. She has no penalties in 2021, 2022 or 2023.

One call removes both charges in full. Interest on the $6,000 stays, because the waiver never touches interest.

A separate $10,000 charge for a missed company form is untouched. That one needs an entirely different argument.

The two routes to relief

What counts as a clean record?

No penalties of significance in the three tax years before the one in question. An estimated tax penalty is generally disregarded for this purpose. You also need every required return filed, or a valid extension in place for anything outstanding.

A small penalty four years ago does not count against you.

One in any of the three preceding years does, however trivial.

Do you need to have paid the tax?

You need the tax paid or a payment arrangement in place. An unpaid balance with no plan behind it blocks the waiver. Setting up an instalment arrangement first and then requesting the waiver is the usual sequence.

Our guide to IRS payment plans from abroad covers the arrangements.

Getting the order right saves a refused request.

How do you actually ask?

By telephone in most cases, which is faster than anything in writing. An agent can check the compliance history and apply the waiver during the call. From Britain that means an international call at an awkward hour.

A written request works too and simply takes longer.

Note the date, the time and the badge number of whoever you speak to.

Can your accountant request it?

Yes, with an authorisation on file, and a practitioner line makes the call considerably shorter. For somebody in Britain that difference matters, because hold times on the public line are long and the hours are unhelpful.

Our guide to IRS online access from Britain covers the authorisation forms.

File the authorisation before the call rather than during it.

Should you use it on the first penalty you get?

Not necessarily, and this is the planning point people miss. Using the waiver resets your clean record, so a later and larger penalty cannot use it. Where several years carry charges, apply it to the most expensive one.

Reasonable cause can handle the smaller years instead.

In our practice that sequencing routinely saves thousands.

Does reasonable cause work for the rest?

It is the only route for the international penalties, and it demands a proper written case. Ordinary business care and prudence is the standard, judged on your own facts. Reliance on an adviser who never asked about foreign assets can qualify.

Our guide to reasonable cause penalty relief covers the standard.

The two routes can run side by side in the same year.

Does it apply after a streamlined filing?

Rarely, because that programme already waives penalties for the years it covers. A charge appearing afterwards usually relates to a year outside the submission. Those years can use the waiver in the ordinary way.

Our guide to IRS letters after streamlined covers what tends to arrive.

Check which year a notice refers to before assuming anything.

What about the minimum late filing charge?

A return more than sixty days late attracts a minimum charge regardless of how little tax is due. For 2025 that minimum is the lesser of $510 or the full amount of unpaid tax. The waiver removes it like any other late filing penalty.

Somebody owing nothing at all faces no minimum charge.

That is why a nil return filed late often costs nothing.

Does interest ever come off?

Only the interest charged on an abated penalty, which disappears with it. Interest on the underlying tax continues from the original due date whatever happens to the penalties. For 2025 that rate stood at 7 per cent, compounded daily.

Our guide to paying tax owed on a streamlined filing covers the interest mechanics.

Paying the tax quickly is the only way to stop it.

Can you get it twice?

Yes, once the three clean years rebuild after the first use. Somebody who used it for 2019 and then stayed clean through 2023 can use it again for 2024. The clock simply runs forward from the last penalty.

So it is a recurring relief rather than a single lifetime allowance.

Most people need it once and never again.

Does it work on a business return?

It applies to several business filings on the same principles, including partnership and corporate returns. The clean record test looks at that entity's history rather than yours. A newly formed company has no history and generally qualifies.

Our guide to UK LLPs and Form 8865 covers one common filing.

Partnership late filing charges per partner per month add up quickly.

What if the request is refused?

Ask why, because refusals usually come from a penalty you had forgotten in the prior three years. Where the history genuinely is not clean, reasonable cause remains available. Nothing about asking for the waiver harms that alternative.

Request a transcript to see your own penalty history properly.

Our guide to requesting transcripts from abroad covers the routes.

How long does it take to appear?

The adjustment usually posts within a few weeks of the call, and a confirming notice follows. Nothing arrives immediately, which unsettles people who were promised it on the phone. Checking the account later is the sensible habit.

Keep the call note until the adjustment shows.

A second call referencing the first usually resolves a stalled case.

Does penalty abatement affect your streamlined options?

Not directly, because the two run on separate tracks. However, a penalty on record is evidence that the IRS has already engaged with a year, and that can matter when you choose a disclosure route later. So check which years are affected first.

Equally, using the waiver does not count as being contacted about anything.

It is a relief you asked for rather than an enquiry they opened.

What if the penalty is on a joint return?

The waiver applies to the return rather than to one spouse, so it clears the charge for both of you. Consequently it also uses up the clean record for both. That is worth weighing before a separated couple spends it.

Either spouse can make the request on a joint year.

Both carry the liability regardless of who asks.

Does an extension protect you anyway?

Largely, because a valid extension removes the late filing charge even without any waiver. Americans abroad get an automatic two month extension to mid June, and a further request runs to mid October. Therefore many penalties are avoidable rather than curable.

An extension to file is never an extension to pay.

So late payment charges can still arise on an extended return.

Is it worth claiming on a small charge?

Usually not, for the reason already given: you spend a relief that only rebuilds after three clean years. On a charge of two hundred dollars the arithmetic rarely favours it. Instead pay the small one and keep the waiver in reserve.

In short, treat it as an asset rather than a reflex.

Most clients have exactly one expensive year worth spending it on.

Does it apply to foreign account report penalties?

Never. Those charges come from a different agency under different legislation, and this waiver has no application to them at all. Reasonable cause and the specific disclosure procedures are the only routes available there.

Our guide to delinquent FBAR submissions covers that process.

Confusing the two wastes months of correspondence.

What about a late state return?

States run their own penalty regimes and most have no equivalent waiver. A few operate something similar on request. Anybody still tied to a state therefore has a separate argument to make, with its own rules and its own deadlines.

Our guide to state tax for expats covers breaking residence properly.

Most long term expatriates have no state filing at all.

Does the waiver apply to an estimated tax penalty?

No, and that is a useful quirk rather than a problem. The estimated tax charge sits outside the waiver, but it is also disregarded when the IRS checks whether your three preceding years were clean. So it neither helps nor hurts you.

Our guide to estimated tax payments from the UK covers the quarterly schedule.

Americans abroad trigger that charge more often than they expect, because no British employer withholds anything for the IRS.

Can you request it before the penalty appears?

No. There has to be an assessed charge on the account for anything to abate, so a request made in advance has nothing to act on. Filing late and then asking is the sequence, uncomfortable as that feels.

File the return first, even where the tax is unpaid.

The late filing charge is far larger than the late payment one, so getting the return in matters more than finding the money.

Does penalty abatement show on your record?

The account transcript records both the original charge and the reversal, so the history stays visible even after the money comes off. That is how the IRS knows you have used it when you ask again. Nothing about it counts against you otherwise.

Lenders and visa caseworkers see a settled account rather than an outstanding penalty, which is what actually matters to them.

So penalty abatement leaves no mark that matters outside the tax system.

Is a written request ever better?

Occasionally. Where the facts are complicated, or where you want reasonable cause considered as an alternative in the same letter, writing gives you a record of exactly what was argued. Penalty abatement by telephone leaves only your own note.

A written request also survives a change of adviser.

Against that, it takes months rather than minutes, and the account keeps accruing interest while somebody reads it.

What records should you keep?

Keep the original notice, your note of the call, the confirming adjustment notice and a transcript showing the penalty removed. Those four items prove the relief was given and prevent the same charge resurfacing.

Record which year you used the waiver on.

That note matters when a later penalty arrives and somebody asks.

How to claim penalty abatement

1. Identify exactly which penalty the notice charges.
2. Check whether it is a filing, payment or foreign form charge.
3. Pull a transcript to confirm three clean preceding years.
4. Pay the tax or arrange an instalment plan first.
5. Decide whether this year is the right one for penalty abatement.
6. Telephone the IRS and request the administrative waiver.
7. Record the date, time and badge number of the agent.
8. Check the account a month later to confirm it posted.

Mistakes and penalties we see with penalty abatement

The first is expecting it to clear a foreign form charge. It never will, whatever the circumstances.

The second is spending it on a small first notice and having nothing left for a larger year.

The third is requesting it with tax outstanding and no payment plan, which simply gets refused.

The fourth is assuming interest goes with the penalty. Only the interest on the penalty itself does.

How US UK Tax Accountants helps

We check which relief each charge is actually eligible for, because clients routinely assume the easy waiver covers the expensive penalties. It does not, and knowing that early changes the whole approach.

Then we sequence the years so the waiver lands where it is worth most. Our US federal returns service covers the filings behind it.

If a penalty notice has arrived and you are unsure which kind it is, get in touch and we will read it.

Last reviewed 19 October 2026. This article is general information and not personal tax advice. Penalty relief turns on your own record, so take advice on yours.