How to Request Penalty Abatement in New York: Step-by-Step Guide

Requesting tax penalty abatement is a formal process with specific requirements for both the IRS and the NY Department of Taxation and Finance. This guide walks through every step: determining your eligibility, gathering documentation, choosing between phone and written requests, drafting your letter, submitting it, following up, and handling a denial.

The process differs depending on whether you are requesting first-time penalty abatement (simpler, often resolved by phone) or reasonable cause relief (requires documentation and a written request). For NY State penalties, written requests are the standard method for all penalty relief.

Step 1: Determine Your Eligibility

Before submitting a request, evaluate which type of relief you qualify for. Requesting the wrong type wastes time and may weaken your position.

Check for First-Time Penalty Abatement (IRS Only)

First-time penalty abatement (FTA) is the easiest path for IRS penalties. You qualify if all three conditions are met:

No penalties were assessed for the three tax years prior to the penalty year
All required returns have been filed (or valid extensions are in place)
The tax is paid in full or you have an approved payment arrangement

You can check your compliance history by creating an IRS Online Account at irs.gov and reviewing your tax transcripts. Look at the three years before the penalty year for any assessed penalties. Alternatively, call the IRS at 800-829-1040 and ask the agent to check your history.

If you meet all three criteria, skip to Step 3 and request FTA by phone. This is the fastest resolution path.

Evaluate Reasonable Cause (IRS and NY State)

If you do not qualify for FTA, or if you need NY State penalty relief, evaluate whether you have a reasonable cause argument. Qualifying circumstances include:

Serious illness, hospitalization, or incapacitation
Natural disaster, fire, or casualty loss
Death of an immediate family member
Inability to obtain records despite reasonable effort
Reliance on incorrect advice from a licensed tax professional
IRS or state agency error or delay

The critical requirement: you must demonstrate that you exercised "ordinary business care and prudence" but were still unable to comply. Simple forgetfulness, being busy, or not knowing the rules does not qualify.

Identify Which Penalties to Target

Review your penalty notice carefully. Identify each penalty type (failure to file, failure to pay, accuracy, estimated tax) and the amount for each. Your request should specify which penalties you are asking to be abated.

Note: IRS interest generally cannot be abated, so focus your request on the penalties. Removing penalties does reduce your balance, which reduces future interest accumulation.

Step 2: Gather Your Documentation

Strong documentation is the difference between approved and denied requests. Collect everything before drafting your letter.

For First-Time Penalty Abatement

FTA requires minimal documentation. The IRS agent checks your compliance history in their system. You need your Social Security number, the tax year in question, the notice number from your penalty letter, and confirmation that all returns are filed and tax is paid or arranged.

For Reasonable Cause

Match your documentation to your specific circumstances:

Medical emergency: Doctor's letter stating the dates and nature of incapacity, hospital admission and discharge records, documentation showing how the condition prevented you from handling tax matters, and evidence of when you resumed normal activities.

Natural disaster or fire: FEMA disaster declaration (if applicable), insurance claims or adjuster reports, police or fire department reports, photos of damage, and records of displacement (temporary housing, hotel receipts).

Inability to obtain records: Copies of written requests you sent for records, responses (or lack of response) from the record holder, dates when records were eventually received, and any interim steps you took to file without the missing records.

Professional reliance: Engagement letter or agreement with the tax professional, written advice you received (emails, letters, memos), evidence that you provided complete and accurate information, and the professional's credentials (CPA, EA, tax attorney).

Death in the family: Death certificate, your relationship to the deceased, documentation showing how estate administration or grief impacted your ability to comply, and the timeline from death to when you were able to resume tax matters.

General Documents for All Requests

Regardless of the specific circumstances, include copies of the penalty notice you received, copies of the tax returns for the penalty year (if filed), proof of payment or installment agreement (if applicable), and a clear timeline of events.

Step 3: Choose Your Request Method

You have three options for requesting penalty abatement. Each works best in different situations.

Option A: Phone Call (Best for FTA)

Call the IRS at 800-829-1040. When connected to an agent, state that you are calling to request first-time penalty abatement for the specific tax year. The agent will pull up your account, verify your compliance history, and can approve the abatement during the call if you qualify.

Pros: Fastest resolution (often same-day), no paperwork required, immediate confirmation.

Cons: Long hold times (1-3 hours is common), cannot submit documentation during the call, limited effectiveness for reasonable cause arguments that require evidence review.

Tips for the call:

Call early in the morning or late in the afternoon for shorter wait times
Have your SSN, tax year, and notice number ready
Be specific: "I am requesting first-time penalty abatement under IRM 20.1.1.3.6.1"
If the first agent says you do not qualify, politely ask for a supervisor review
Take notes: agent name, ID number, date, and the outcome

Option B: Written Letter (Best for Reasonable Cause)

A written letter allows you to present your full narrative with supporting documentation. This is the standard method for reasonable cause requests and is required for NY State penalty relief.

Your letter should follow this structure:

Header: Your name, address, SSN, daytime phone number
Subject line: "Request for Penalty Abatement, Tax Year [YYYY], Notice [number]"
Opening paragraph: State clearly that you are requesting abatement of [specific penalty type] for [tax year], in the amount of $[amount]
Circumstances paragraph(s): Explain what happened, when it happened, and how it prevented you from filing or paying on time. Be specific with dates and facts.
Ordinary business care paragraph: Explain the steps you took to try to comply despite the circumstances, and what you did as soon as the obstacle was resolved.
Current compliance paragraph: State that all returns are now filed and tax is paid (or an arrangement is in place).
Documentation list: Reference each attached document by name.
Closing: Request a written response and provide your contact information.

Keep the letter to one to two pages. Be factual, specific, and concise. Avoid emotional language, and do not apologize for your circumstances. Present the facts and let the documentation support your case.

Option C: IRS Form 843 (Formal Alternative)

IRS Form 843, "Claim for Refund and Request for Abatement," is the official form for penalty abatement requests. It is appropriate for IRS penalties only (not NY State).

Complete the form with your identifying information, the tax year, the type and amount of penalty, and the reason code. Attach a separate statement explaining your reasonable cause and all supporting documentation.

Form 843 is functionally equivalent to a letter for penalty abatement purposes. Some practitioners prefer it because it provides a structured format. Others prefer a letter because it allows more room to present the narrative. Either method is acceptable to the IRS.

Step 4: Write Your Request Letter

A well-structured letter significantly increases your chances of approval. Here is how to write an effective penalty abatement request.

Opening: Be Direct

State your request in the first sentence. Do not begin with background or explanation.

Example: "I am writing to request abatement of the failure to file penalty of $2,340 assessed for tax year 2024, as shown on Notice CP14 dated September 15, 2025."

Body: Tell the Story with Dates

Present your circumstances chronologically, with specific dates for every event. The reviewing agent needs to see a clear cause-and-effect chain: the triggering event, how it prevented compliance, and when you were able to resume.

Example: "On March 28, 2025, I was admitted to Strong Memorial Hospital in Rochester, NY for emergency cardiac surgery. I remained hospitalized until April 14, 2025, one day before the filing deadline. Following discharge, my cardiologist restricted me from physical and mental exertion until June 1, 2025. During this period, I was unable to access my tax records, meet with my accountant, or manage my financial affairs. My wife was serving as my primary caregiver and was also unable to handle these matters. I filed my return on June 18, 2025, seventeen days after my restrictions were lifted."

Ordinary Business Care: Show You Tried

The IRS requires evidence that you exercised "ordinary business care and prudence." Explicitly address this standard in your letter.

Example: "In previous years, I filed my returns by March 15, well before the deadline. I had an appointment scheduled with my accountant for March 30, which I was unable to keep due to the hospitalization. Upon my recovery, I contacted my accountant immediately and filed the return as soon as the preparation was complete."

Closing: State Current Compliance

End by confirming that you are now fully compliant: all returns filed, tax paid or payment arranged, and steps taken to prevent future penalties.

Example: "All required returns have been filed. The tax for 2024 has been paid in full as of July 1, 2025. I have taken steps to ensure timely filing going forward, including prepaying my accountant's fees and scheduling tax preparation for February of each year."

Formatting Tips

Use standard business letter format. Type your letter (handwritten letters are harder to read and may be delayed). List attached documents by name. Keep paragraphs short (three to four sentences maximum). Use dates throughout.

Step 5: Submit Your Request

For IRS Requests

Mail your letter or Form 843 to the IRS service center shown on your penalty notice. If you do not have a notice, mail to the IRS processing center for your region. For most New York taxpayers, this is:

Internal Revenue Service P.O. Box 802503 Cincinnati, OH 45280-2503

(Verify the current address on irs.gov, as it may change.)

Always use certified mail with return receipt requested. This provides proof that the IRS received your request and the date they received it. Keep a copy of everything you send.

If you have already paid the penalty and are requesting a refund, submit Form 843 to the same address. The IRS will issue a refund or credit if your request is approved.

For NY State Requests

Mail your letter to the address shown on your DTF penalty notice. If you do not have a notice, use:

NYS Department of Taxation and Finance Penalty Review Unit W.A. Harriman Campus Albany, NY 12227

(Verify the current address on tax.ny.gov.)

Use certified mail with return receipt for NY State requests as well. The DTF processes requests in the order received, and having proof of the submission date protects you if there are processing delays.

Electronic Submission Options

The IRS does not currently accept penalty abatement requests through its online portal for most individual taxpayers. Phone and mail remain the primary methods.

NY State allows some correspondence through the DTF Online Services portal. Log in to your account to check if electronic submission is available for your specific notice type.

Step 6: Follow Up on Your Request

IRS Timeline

FTA by phone: Immediate resolution during the call
Written FTA request: 30 to 45 days
Reasonable cause letter: 30 to 60 days
Complex cases (multiple years, large amounts): 60 to 120 days

If you have not received a response within the expected timeframe, call the IRS at 800-829-1040 and reference your request. Have your certified mail receipt number available.

The IRS may request additional information or documentation. Respond promptly, typically within 30 days, to keep your request active. Failure to respond to an IRS request for additional information usually results in denial.

NY State Timeline

Standard penalty relief request: 60 to 90 days
Complex cases: 90 to 120 days

Contact the DTF at 518-457-5181 if you have not received a response within 90 days. Reference your notice number and the date you submitted your request.

While Waiting

Penalties and interest continue to accrue while your request is pending, unless the agency agrees to suspend them. Continue making any required payments (installment agreement payments, estimated tax payments) during the review period. Stopping payments while waiting for a decision can create additional penalties.

If your request is ultimately approved, the IRS or DTF will adjust your account and refund any penalties you paid during the review period (or credit them to your remaining balance).

Step 7: What to Do If Your Request Is Denied

A denial is not the end of the road. Both the IRS and NY State have appeal processes that frequently overturn initial denials.

IRS Appeals

If the IRS denies your request, the denial letter will explain your appeal rights. You generally have 30 days from the date of the denial to submit an appeal to the IRS Office of Appeals.

Your appeal should include a copy of the denial letter, a statement explaining why you disagree with the denial, any additional documentation that supports your case, and IRS Form 12203 (Request for Appeals Review) for amounts under $25,000.

The IRS Office of Appeals is independent from the examination and collections divisions. An appeals officer reviews your case with fresh eyes and has the authority to grant relief that the original reviewer denied. Many penalty abatement requests that are denied at the initial level are approved on appeal.

For amounts exceeding $25,000, submit a formal written protest instead of Form 12203. The protest must include a statement of facts, a statement of law, and the arguments supporting your position.

NY State Appeals

If the DTF denies your request, you have two appeal options.

Conciliation conference (BCMS). Request a conference with the Bureau of Conciliation and Mediation Services within 90 days of the denial. The conference is informal: you meet with a conciliator (in person, by phone, or by video), present your case, and the conciliator issues a binding order. BCMS conferences resolve many penalty disputes without further proceedings.

Division of Tax Appeals. If conciliation does not resolve the matter, or if you prefer to skip conciliation, you can petition the Division of Tax Appeals within 90 days of the denial (or within 90 days of an unfavorable BCMS order). This is a formal hearing before an administrative law judge. You present evidence, the DTF presents its position, and the judge issues a determination. This process takes six months or longer.

Strengthening Your Appeal

If your initial request was denied because of insufficient documentation, gather the additional documents before appealing. Many denials cite "insufficient documentation" as the reason, and providing the missing evidence on appeal can reverse the decision.

If your request was denied because the reviewer did not find your circumstances constituted reasonable cause, consider whether your letter clearly explained the cause-and-effect relationship. On appeal, present the same facts more explicitly, emphasizing the specific dates and how the circumstances prevented compliance.

Consider hiring an enrolled agent for the appeal if you handled the initial request yourself. Professional representation can reframe your case in the language the appeals officer or conciliator expects.

When to Hire a Professional

You can request penalty abatement yourself, and many taxpayers succeed with straightforward FTA requests. Professional help becomes important when:

Your penalties exceed $10,000
Multiple tax years are involved
You have both IRS and NY State penalties
Your reasonable cause argument is complex
A previous request was denied
The IRS or DTF has initiated collections (liens, levies, wage garnishments)
You are uncomfortable communicating directly with the IRS or DTF

An enrolled agent has unlimited practice rights before the IRS, meaning they can handle any penalty matter on your behalf. They can also represent you before the NY DTF through power of attorney.

Jennifer O'Neill, EA, MBA, at New York tax penalty abatement expert in West Seneca, NY has handled penalty abatement requests for over 40 years. The firm is BBB accredited and resolves both IRS and NY State penalties. She can evaluate your eligibility, prepare your request, submit it, follow up, and handle appeals if needed. Call 1-800-477-4357 for a consultation.

Checklist: Before You Submit

Use this checklist to ensure your request is complete before sending.

Eligibility confirmed:

Checked three-year compliance history for FTA eligibility
Identified reasonable cause circumstances if FTA does not apply
Verified all required returns are filed
Tax is paid or payment arrangement is in place

Documentation gathered:

Copy of penalty notice
Supporting documents for circumstances (medical, disaster, professional reliance)
Copies of filed returns for the penalty year
Proof of payment or installment agreement

Request prepared:

Letter or Form 843 completed with all required information
Specific penalty type and amount identified
Timeline of events included with specific dates
Ordinary business care addressed
Current compliance confirmed
Documentation list included

Ready to submit:

Correct mailing address confirmed (from penalty notice or agency website)
Copies made of everything being sent
Certified mail with return receipt purchased
Separate requests prepared for IRS and NY State if both apply

Frequently Asked Questions

What form do I use to request penalty abatement?

For IRS penalties, use Form 843 (Claim for Refund and Request for Abatement) or a written letter. Either is acceptable. For first-time penalty abatement, a phone call to 800-829-1040 is often sufficient. For NY State penalties, submit a written letter to the Department of Taxation and Finance at the address on your penalty notice.

Where do I send the penalty abatement request?

Send IRS requests to the service center address on your penalty notice, or the IRS processing center for your region. For most New York taxpayers, this is the Cincinnati processing center. Send NY State requests to the address on your DTF penalty notice or the Penalty Review Unit in Albany. Always use certified mail with return receipt.

How long does penalty abatement take?

IRS first-time penalty abatement by phone can be resolved during a single call. Written IRS requests take 30 to 60 days. NY State requests take 60 to 90 days. Appeals add additional time: 30 to 90 days for IRS appeals, 60 to 90 days for NY conciliation conferences, and six or more months for formal NY Division of Tax Appeals hearings.

Can I request penalty abatement for multiple years?

Yes. Submit a separate request for each tax year. If you qualify for FTA, it applies to the earliest eligible year. For other years, use reasonable cause arguments. Each year is evaluated independently, so the same underlying circumstances can support requests for multiple years if they affected multiple filing deadlines.

What if I cannot afford to pay the tax before requesting abatement?

You do not need to pay the tax in full before requesting abatement, but you do need to have filed the return and either paid the tax or set up a payment arrangement. An installment agreement satisfies the payment requirement for FTA eligibility. If you cannot afford any payments, explore currently not collectible status before pursuing penalty abatement.

Is there a deadline for requesting penalty abatement?

For penalty abatement requests where you want a refund of penalties already paid, the IRS deadline is two years from the date you paid the penalty or three years from the date the return was due, whichever is later. For requests to remove a penalty from your balance (where you have not yet paid), there is no strict deadline, but acting quickly limits additional interest accumulation.

Can I request abatement for both IRS and NY State penalties at the same time?

Yes, but you must submit separate requests to each agency. The IRS and NY DTF are independent authorities with different review processes. Success with one does not guarantee success with the other. The same underlying facts and documentation can support both requests.

What happens to interest if my penalties are abated?

Removing penalties reduces your total balance, which reduces the amount of interest that accrues going forward. However, interest that has already accrued on the penalties is generally not reversed unless the IRS caused an error or unreasonable delay. Interest on the underlying tax liability remains regardless of penalty abatement.