IRS Assessed a Penalty? You May Not Have to Pay All of It — or Any of It.
The IRS provides legitimate administrative relief programs that can reduce or completely waive tax penalties — including failure-to-file, failure-to-pay, FBAR, and information return penalties. These programs were designed for exactly the situations most US expats find themselves in: people who didn't know, got bad advice, or simply fell behind. Mark Anderson, CPA prepares penalty abatement requests for clients in 50+ countries.
The IRS Assessed a Penalty. Before You Pay It — Read This.
The most common mistake people make after receiving an IRS penalty notice is paying it immediately — assuming the penalty is final and non-negotiable. It is not. The IRS operates two well-established administrative relief programs that allow taxpayers to have penalties reduced or completely eliminated: First-Time Abatement (FTA) and Reasonable Cause relief. A third option — the IRS Streamlined Filing Procedure — waives all penalties for qualifying expats who haven't yet filed at all.
For US citizens living abroad, the grounds for Reasonable Cause relief are often stronger than for domestic filers. The US is one of only two countries in the world that taxes citizens on worldwide income regardless of residence. Most Americans who move abroad are never told this by their employer, their host country's tax authority, or any US government agency. They file taxes in their new country as required and reasonably assume their US obligation no longer applies. That is a genuinely understandable mistake — and the IRS has, in practice, accepted it as Reasonable Cause when properly documented.
What does not work: ignoring the penalty, making a vague phone call, or sending a generic letter saying "I didn't know." What does work: a specific, factual written narrative — submitted via Form 843 or a formal written request — that explains the exact circumstances, demonstrates ordinary care, and directly addresses the IRS's standard for relief. Mark Anderson, CPA prepares these requests for clients in 50+ countries.
Do not pay a penalty before having it reviewed. Paying a penalty is not the same as agreeing to it — but once paid, recovering it requires a separate refund claim process (Form 843 or amended return). It is always faster to contest the penalty before paying than to claim a refund after. Contact Mark before writing any check to the IRS.
What Type of Penalty Did You Receive?
Mark handles abatement requests for all of the following penalty types. Check which applies to your situation:
- Failure-to-file penalty (5% per month, up to 25% of tax owed)
- Failure-to-pay penalty (0.5% per month on unpaid tax)
- Accuracy-related penalty (20% of underpayment)
- FBAR penalty — non-willful ($10,000 per year under Bittner)
- Form 5471 penalty ($10,000 per year, per form)
- Form 5472 penalty ($25,000 per year, per form)
- Form 3520 penalty ($10,000 or 35% of unreported gift)
- Form 8938 (FATCA) penalty ($10,000 + continued failure)
- Payroll tax deposit penalties (Trust Fund Recovery Penalty)
Not all penalty types are equally abatable — but most have at least one viable relief path. Mark assesses each situation individually during the free consultation.
First-Time Abatement vs. Reasonable Cause — Understanding Both Options
The IRS offers two distinct administrative relief programs for penalty abatement. The right one depends on your compliance history, the nature of your penalty, and your specific circumstances. Mark determines which path — or combination — applies to your situation before preparing any request.
First-Time Abatement (FTA)
FTA is an automatic administrative waiver available to taxpayers with a clean compliance record. It eliminates failure-to-file, failure-to-pay, and failure-to-deposit penalties for the first year of non-compliance — without requiring any explanation of why you failed to comply.
You qualify for FTA if:
- You have filed all required returns (or filed a valid extension) for the three prior tax years
- You have no penalties assessed in those three prior years
- You have paid — or arranged to pay — any outstanding tax balance
Best used when: You have a clean prior history and this is an isolated first-time failure. FTA is faster than Reasonable Cause — it can sometimes be granted immediately by calling the IRS directly, though Mark handles this process on your behalf.
Reasonable Cause Abatement
Reasonable Cause relief is available when you can demonstrate that your failure to comply resulted from circumstances beyond your control — and that you exercised ordinary business care and prudence. It requires a formal written submission with supporting documentation.
Accepted Reasonable Cause grounds include:
- Genuine lack of knowledge of US worldwide taxation obligations while abroad
- Reliance on a local tax advisor unfamiliar with US international tax law
- Serious illness or incapacitation (yours or an immediate family member's)
- Natural disaster, civil disturbance, or other unavoidable event
- Incorrect written advice received directly from the IRS
- Death of a close family member during the relevant period
Best used when: FTA is unavailable (prior penalties exist or the tax year is beyond the FTA window) or when the factual circumstances clearly support a documented Reasonable Cause argument. Requires a carefully drafted written narrative.
Can you use both? In some cases, yes — FTA on the first eligible year and Reasonable Cause on subsequent years. Mark assesses which relief path applies to each year separately where multi-year penalties are involved.
Why Expats Have Stronger Reasonable Cause Arguments Than Domestic Filers
Generic Reasonable Cause requests fail when they are vague — "I didn't know" without context, without facts, and without a clear link between the circumstances and the failure to comply. What the IRS actually evaluates is whether, given everything you knew and had access to at the time, a reasonable person exercising ordinary care would have known to comply. For expats, the facts often genuinely support that standard being unmet.
Unawareness of US Worldwide Taxation
The US taxes its citizens on worldwide income regardless of residence — a rule that applies in only one other country in the world (Eritrea). Most Americans who move abroad are never formally notified of this obligation. Their host country's tax authority does not mention it. Their employer may not either. When properly documented — when the taxpayer first learned of the obligation, what steps they took upon discovery — this is a well-recognized Reasonable Cause argument the IRS accepts.
Reliance on Local Professional Advice
Many expats hired a qualified local accountant in their country of residence who competently handled local tax filings but had no knowledge of US international tax obligations. Reliance on professional advice is a recognized Reasonable Cause ground — but only when documented correctly: that the taxpayer provided accurate information, acted in good faith, and had no reason to doubt the advisor's qualifications at the time. Mark has prepared successful abatement requests based on this argument for clients in dozens of countries.
Life Events During International Relocation
International relocation is one of the most disruptive life events a person can experience — especially when combined with language barriers, foreign banking, new employment, or family transitions. The IRS has accepted relocation-related hardship as a component of Reasonable Cause when other contributing factors are present. Serious illness, natural disaster, a family death, or significant financial distress during the non-compliance period are all documented grounds. These must be specific and verifiable — not general assertions of busyness or inconvenience.
Background: James is a US citizen who moved from New York to Germany in 2018 for a job with a German employer. He registered with the German tax authority, filed German income taxes every year using a local steuerberater (tax advisor), and assumed — as most Americans abroad do — that filing in Germany meant he was fully tax-compliant. He had never been informed by his employer, the US government, or anyone else that US citizens must also file US returns on worldwide income.
In 2024, a friend mentions expat tax obligations. James contacts Mark. Review reveals four years of unfiled Form 1040 returns, four years of unfiled FBARs (he has a German bank account), and IRS penalties that could theoretically total over $50,000.
Abatement path: Because James had not yet been contacted by the IRS, he qualified for the IRS Streamlined Foreign Offshore Procedure, which allowed him to file all back returns and FBARs with all penalties waived — by certifying non-willful conduct on Form 14653. His penalty exposure: $0. His tax owed: modest (German taxes were high enough for the Foreign Tax Credit to substantially offset US liability). Total cost: Mark's fee and four years of back taxes plus interest.
Individual outcomes vary. This illustrates the Streamlined path — an alternative to abatement where penalties are waived proactively rather than contested after assessment.
Common IRS Penalties for Expats — Amounts and Abatement Availability
This table gives a reference view of the penalties most commonly assessed against US expats and the primary abatement paths available for each. Not every case qualifies for every path — Mark assesses eligibility for your specific situation during the free consultation.
| Penalty Type | Amount / Rate | FTA Available? | Reasonable Cause? | Streamlined Available? |
|---|---|---|---|---|
| Failure-to-File (Form 1040) | 5% per month, max 25% | ✓ Yes | ✓ Yes | ✓ Waived |
| Failure-to-Pay | 0.5% per month until paid | ✓ Yes | ✓ Yes | ✓ Waived |
| Accuracy-Related Penalty | 20% of underpayment | ✗ No | ✓ Yes | ✓ Waived |
| FBAR Non-Willful (per Bittner) | Up to $10,000 per year | ✗ No | ✓ Yes | ✓ Waived |
| FBAR Willful | Greater of $100K or 50% per account | ✗ No | Limited | ✗ Not eligible |
| Form 5471 Information Return | $10,000 per form per year | ✗ No | ✓ Yes | ✓ Often waived |
| Form 5472 Information Return | $25,000 per form per year | ✗ No | ✓ Yes | Case-by-case |
| Form 3520 Foreign Gift / Trust | $10,000 or 35% of gift value | ✗ No | ✓ Yes | Case-by-case |
| Form 8938 FATCA | $10,000 initial + $10K/30 days | ✗ No | ✓ Yes | ✓ Waived |
⚠️ FBAR willful penalties are in a different category. If the IRS determines that your failure to file FBARs was willful — i.e., intentional — the penalty structure changes dramatically. Willful FBAR penalties start at the greater of $100,000 or 50% of the account balance per account per year, and criminal prosecution is possible. If you are at risk of a willful FBAR determination, contact Mark immediately — this situation requires specialized legal advice alongside CPA services.
Complete Penalty Abatement Service — From Review to Resolution
Mark Anderson, CPA handles every step of the penalty abatement process — from evaluating whether the penalty can be contested to drafting the Reasonable Cause narrative and managing all IRS follow-up. You do not need to contact the IRS yourself at any stage. See full pricing at our rates page.
Penalty Assessment & Relief Path Selection
Mark reviews the penalty notice, determines the penalty type, and evaluates which relief path — FTA, Reasonable Cause, or Streamlined Filing — is most likely to succeed given your compliance history and personal circumstances. Some situations have multiple viable paths; Mark identifies the strongest one first.
Reasonable Cause Narrative
The written Reasonable Cause narrative is the core of any abatement request and the element that most often determines whether it succeeds or fails. Mark drafts a specific, factual, chronologically organized narrative — citing the relevant IRS standards, referencing supporting documents, and directly addressing each element of the Reasonable Cause test. You review and sign before submission.
Form 843 Preparation
Form 843 (Claim for Refund and Request for Abatement) is the formal IRS form for requesting abatement of assessed penalties and interest. Mark prepares Form 843 with all required attachments, ensuring it is directed to the correct IRS service center and includes the exact documentation the IRS requires for your penalty type.
FTA Request Management
First-Time Abatement can sometimes be requested by phone — but the outcome depends heavily on how the request is framed and whether all eligibility criteria are clearly met during the call. Mark handles FTA requests on your behalf, either verbally or in writing, and confirms the result in writing regardless of how the initial request is made.
Appeals Preparation (If Denied)
If an initial abatement request is denied, Mark evaluates the denial letter and prepares an appeal to the IRS Independent Office of Appeals — which provides a fresh, independent review of the abatement request by an IRS appeals officer. Most abatement denials that have factual merit are worth appealing, and the Appeals process is separate from the examination division.
Underlying Compliance — Back Returns & FBARs
Penalty abatement requests must be paired with actual compliance — you cannot request abatement of a failure-to-file penalty while the return is still unfiled. Mark handles all required back filings — Form 1040 returns, FBARs (FinCEN Form 114), and information returns — as part of the abatement engagement where needed, including Streamlined Filing where it applies.
Streamlined Filing vs. Penalty Abatement — The Critical Distinction
These are the two main routes to penalty relief for US expats — and they are mutually exclusive for the same years. Understanding the difference determines your entire strategy.
| Factor | Streamlined Foreign Offshore Procedure | Penalty Abatement (FTA / Reasonable Cause) |
|---|---|---|
| When to use it | Before the IRS contacts you — proactive compliance | After the IRS has assessed a penalty |
| Penalty result | ✓ All penalties waived — proactively | Penalties may be reduced or eliminated — case-by-case |
| Years covered | 3 years of Form 1040 + 6 years of FBAR | Any year(s) with assessed penalty |
| Willfulness requirement | Must certify non-willful on Form 14653 | No willfulness certification required (but willful conduct disqualifies Reasonable Cause) |
| IRS contact status | Must not have been contacted by IRS about the relevant years | Used after IRS has already assessed a penalty |
| Tax owed | Tax + interest still owed; only penalties waived | Tax + interest still owed; penalties may be reduced |
| Best for | Expats who discover compliance gap before IRS does | Expats who have received a penalty notice |
If the IRS has not yet contacted you about unfiled returns or unreported accounts, the Streamlined Procedure is almost certainly the better path — it waives all penalties proactively rather than contesting them after assessment. Contact Mark to determine which window still applies to your situation.
Flat-Fee Pricing — Quoted After Your Free Consultation
Penalty abatement fee depends on the penalty type, number of years, complexity of the Reasonable Cause narrative, and whether back filings are also required. All fees are quoted upfront after the free consultation — before any work begins. Full details at our rates page.
Request preparation and submission for a single failure-to-file or failure-to-pay penalty where FTA eligibility is confirmed. Includes IRS follow-up correspondence.
Full written Reasonable Cause narrative, Form 843 preparation, supporting documentation assembly, and IRS correspondence management. Multi-year or multi-penalty cases quoted individually.
- Free 30-minute penalty review
- Relief path assessment (FTA vs. RC vs. Streamlined)
- Form 843 preparation
- Written narrative drafted & reviewed by you
- All IRS correspondence managed
- Appeals preparation if denied
Cost-benefit perspective: A successful abatement request on a single Form 5471 penalty ($10,000) or Form 5472 penalty ($25,000) typically recovers Mark's fee many times over. Even a partial reduction — say, one of three assessed years — produces meaningful savings. The free consultation gives you a clear picture of the abatement probability before you commit to any fee.
From Penalty Notice to Resolution — The Process
Mark handles the complete penalty abatement engagement 100% remotely. You do not need to call the IRS, attend any meetings, or be located in any particular country. Here is the exact process from first contact to final resolution. If unfiled returns are also involved, explore the Streamlined Filing Procedure — which may resolve the underlying compliance gap and waive penalties simultaneously.
Free Consultation — Penalty Review
Send Mark a copy of the penalty notice (photo or scan is fine). He reviews the penalty type, the amount, the affected tax year(s), and your prior compliance history — and identifies which relief path gives you the strongest case. This consultation is free and takes 30 minutes. You leave knowing exactly what your options are and what each path is likely to achieve.
Facts & Documentation Gathering
Depending on the path, Mark collects: your prior years' tax returns (to confirm FTA eligibility), a detailed timeline of events related to the non-compliance (to build the Reasonable Cause narrative), any correspondence received from the IRS, and supporting evidence — medical records, professional engagement letters, foreign tax returns, or other documentation that substantiates the Reasonable Cause grounds.
Reasonable Cause Narrative Drafted
For Reasonable Cause cases, Mark drafts the complete written narrative — telling the factual story of your non-compliance in a way that directly addresses each element of the IRS's standard: what happened, why it prevented compliance, what ordinary care you exercised, and what steps you took when you discovered the issue. You review and approve the draft before submission.
Form 843 Prepared & Submitted
Mark prepares Form 843 (Claim for Refund and Request for Abatement) with all required attachments and submits it to the appropriate IRS service center by certified mail. A copy of everything submitted is retained. Where applicable, the underlying back returns and FBARs are also filed as part of this submission to demonstrate full compliance.
IRS Response & Follow-Up
The IRS typically responds to abatement requests within 3–6 months. Mark monitors all correspondence and handles every follow-up request from the IRS. If the initial abatement is granted, Mark confirms in writing and advises on any remaining compliance steps. If denied, he evaluates the denial and advises on whether an appeal is warranted — and prepares the Appeals submission if it is.
Ongoing Compliance — Preventing Recurrence
Penalty abatement addresses what has already been assessed. Preventing future penalties requires ongoing compliance — annual Form 1040 filings, annual FBARs (FinCEN Form 114), and any applicable information returns. Mark handles ongoing annual compliance for abatement clients as a natural continuation of the engagement — because the best penalty is the one that never gets assessed.
IRS Penalty Abatement — Questions Expats Ask Most
Straightforward answers to the questions Mark hears most often from US expats who have received an IRS penalty notice.
Yes. The IRS provides two main administrative relief programs: First-Time Abatement (FTA) and Reasonable Cause relief. FTA is available to taxpayers with a clean compliance history for the prior three years. Reasonable Cause applies when the taxpayer can demonstrate that failure to comply resulted from circumstances beyond their control and that they exercised ordinary care. Expats often have particularly strong Reasonable Cause arguments — genuine lack of awareness of US worldwide taxation, reliance on a local advisor with no US tax knowledge, and disruption from international relocation are all grounds the IRS has accepted. A third path — the IRS Streamlined Foreign Offshore Procedure — waives all penalties proactively for qualifying non-willful filers who come forward before the IRS contacts them.
First-Time Abatement (FTA) is an IRS administrative waiver that removes failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers with a clean compliance history. To qualify, you must have: (1) filed all required returns or a valid extension for the three years before the penalty year; (2) no penalties assessed in those three prior years (other than an estimated tax penalty); and (3) paid or arranged to pay any tax balance. FTA is the fastest abatement path when eligibility is confirmed — it can sometimes be granted immediately, without requiring any explanation of why you failed to comply.
Reasonable Cause abatement is available when a taxpayer can demonstrate that their failure to comply resulted from circumstances beyond their control — and that they exercised ordinary care despite those circumstances. Unlike FTA, Reasonable Cause requires a formal written submission explaining the specific facts and how they prevented compliance. Accepted grounds include: genuine lack of knowledge of the US filing requirement while abroad, reliance on a local professional advisor who was unfamiliar with US tax law, serious illness, natural disaster, death of a close family member, or incorrect written advice from the IRS. The narrative must be specific and factual — not a general assertion. Mark prepares the complete written request including Form 843.
Yes, in certain circumstances. The most efficient path for most non-willful FBAR filers is the IRS Streamlined Foreign Offshore Procedure, which waives all FBAR penalties for qualifying expats who proactively catch up on missed filings before the IRS contacts them. For FBAR penalties already formally assessed, a Reasonable Cause abatement request can be submitted via Form 843. The Supreme Court's Bittner v. United States (2023) decision also clarified that non-willful FBAR penalties apply on a per-return (per-year) basis rather than per-account — which can significantly reduce assessed penalties in some cases. Willful FBAR penalties are in a separate, much more serious category that requires different handling.
Yes — and this is one of the strongest Reasonable Cause arguments available to US expats. The IRS recognizes that lack of knowledge of the law can constitute Reasonable Cause when the taxpayer exercised ordinary care. Many Americans living abroad genuinely did not know that the US taxes citizens on worldwide income regardless of residence, because their host country does not, their employer never informed them, and no US government agency notified them of the obligation. A well-documented narrative explaining when and how you discovered the requirement, and what steps you took upon discovery, is frequently successful. The key is specificity — dates, facts, and the direct causal link between unawareness and non-compliance.
Reliance on professional advice is a well-established Reasonable Cause ground — but it must be documented correctly to succeed. You need to show: (1) you provided your advisor with complete, accurate information about your situation; (2) you relied in good faith on their guidance; (3) the advisor had qualifications that made reliance reasonable — even if they lacked US tax expertise; and (4) you had no independent reason to doubt their advice was correct. Many expats hired competent local tax professionals who simply had no knowledge of US international tax obligations. When this situation is documented specifically and factually, it is a genuinely recognized abatement basis. Mark has prepared successful requests on this ground for clients in dozens of countries.
Form 843 (Claim for Refund and Request for Abatement) is the IRS form used to formally request abatement of assessed penalties and interest, or to claim a refund of penalties already paid. It identifies the tax year, penalty type, amount, and the basis for the abatement request. For Reasonable Cause requests, Form 843 is submitted with a detailed written narrative and supporting documentation attached. Mark prepares Form 843 and all attachments as part of the standard penalty abatement engagement — you review the complete package before it is submitted to the IRS.
Generally, no — not if you intend to contest the penalty. Paying a penalty before the abatement request is resolved does not prevent you from pursuing abatement, but it changes the nature of your request from an abatement to a refund claim, which has a different procedural path. Additionally, paying signals acceptance of the IRS's position, which can complicate Reasonable Cause arguments in some circumstances. The exception: if the penalty has accrued to a level where the IRS is threatening collection action (levy or lien), paying to stop enforcement may be advisable while pursuing abatement simultaneously. Mark advises on this timing question specifically during the free consultation.
First-Time Abatement requested by phone can sometimes be granted immediately, with written confirmation following in 4–8 weeks. Formal Reasonable Cause abatement requests (Form 843) typically receive an IRS response in 3–6 months. If the initial request is denied and you appeal to the IRS Independent Office of Appeals, add 6–12 months to the timeline. The total process from submission to final resolution is usually 6–18 months for contested cases. Mark monitors all open requests and handles every follow-up step — you do not need to track IRS response timelines yourself.
A denial of a penalty abatement request is not final. You can appeal the denial to the IRS Independent Office of Appeals — which provides a genuinely independent review of the IRS's determination, conducted by an appeals officer who was not involved in the original decision. Appeals are available for both FTA denials and Reasonable Cause denials. In practice, the Appeals process often produces different outcomes than the initial determination, particularly when the original request was denied on procedural grounds or with limited analysis of the specific facts. Mark prepares and handles the Appeals submission where the underlying facts continue to support the abatement argument.
When a penalty is abated, the interest that accrued specifically on that penalty is also abated — because interest is computed on the underlying penalty balance, which is being eliminated. However, interest on the underlying tax owed (as distinct from the penalty) generally cannot be abated through these programs except in narrow circumstances involving IRS error or unreasonable IRS delay. In practice, penalty abatement also removes the associated penalty interest — which can be a significant additional saving when penalties have been outstanding for multiple years.
Yes, within the applicable statute of limitations. A claim for refund of an overpaid or incorrectly paid penalty must generally be filed within three years of the date the original return was filed, or two years from the date the penalty was paid — whichever is later. If you paid a penalty that could have been abated under FTA or Reasonable Cause, and you are still within this window, a refund claim via Form 843 is available. Penalties paid more than three years ago are generally outside the refund window — though exceptions apply in some circumstances. Mark reviews the timeline to confirm whether a refund claim is available before recommending this path.
Before You Pay That IRS Penalty — Have It Reviewed. It May Be Reducible or Eliminable.
Mark Anderson, CPA reviews IRS penalties for US expats in 50+ countries and prepares FTA and Reasonable Cause abatement requests — including Form 843, the written narrative, and all IRS correspondence management. Free 30-minute consultation, no obligation.
Schedule Your Free Penalty Review
Send Mark a copy or description of the IRS penalty notice you received — penalty type, tax year, amount, and a brief summary of what happened. He will personally review your situation and advise on the best abatement path.
- Free 30-minute penalty review — no commitment required
- Relief path identified — FTA, Reasonable Cause, or Streamlined
- Form 843 and written narrative prepared and submitted on your behalf
- All IRS correspondence managed — you don't contact the IRS directly
- 100% online — US expat CPA serving 50+ countries worldwide
- US-licensed CPA with Fortune 500 corporate tax background
Prefer to reach us directly?
📞 +1 (646) 961-1866 💬 WhatsApp — send a photo of your notice ✉ mark@markandersoncpa.com — scan or PDF accepted Line ID: marquenyc