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First Time Abatement
If you have been compliant for the three years before the penalty year, the IRS may remove failure-to-file and failure-to-pay penalties as an administrative waiver. You still need your required returns filed and the tax paid or on a payment arrangement. No reasonable cause argument needed. You do have to ask. This can save thousands with a single phone call.
Reasonable Cause
When FTA is not available, you can argue that circumstances beyond your control prevented compliance: serious illness, natural disaster, reliance on bad professional advice, death in the family. The key is connecting the event directly to the failure and showing you acted responsibly once the impediment was removed.
The Numbers
Failure-to-file penalty: 5% per month, up to 25%. Failure-to-pay: 0.5% per month, up to 25%. On a $50,000 debt, that is up to $25,000 in penalties alone. Getting even half of that removed changes the economics of resolution significantly.
Never pay a penalty you do not have to. The IRS has procedures for removing them. Use them.
This guide is general information about federal tax law, not legal advice for your situation. Reading it does not create an attorney-client relationship.