South Carolina Tax Law Firm PA

IRS Penalty Abatement Attorney in South Carolina

IRS penalty abatement is the removal or reduction of penalties the IRS has charged, such as penalties for filing late, paying late, or understating tax. Penalties and the interest on them can add a large amount to a tax bill, and many taxpayers qualify for relief without realizing it. South Carolina Tax Law Firm PA helps individuals and businesses across South Carolina request penalty abatement based on first-time abatement, reasonable cause, or other grounds, and appeals when the IRS says no.

Call (803) 753-7376 or request a consultation. Have the IRS notice that shows the penalty in front of you, along with the tax years involved.

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Common IRS penalties

  • Failure to file. Generally 5 percent of the unpaid tax for each month or part of a month a return is late, up to 25 percent, with a minimum penalty when a return is more than 60 days late (IRC 6651(a)(1)).
  • Failure to pay. Generally 0.5 percent of the unpaid tax per month, up to 25 percent. The rate drops while an installment agreement is in effect for a timely filed return and rises after a final notice of intent to levy (IRC 6651(a)(2)).
  • Failure to deposit. For employers that make payroll tax deposits late or incorrectly, from 2 to 15 percent depending on how late the deposit is (IRC 6656).
  • Accuracy-related penalty. Usually 20 percent of an underpayment caused by negligence or a substantial understatement of tax, often proposed after an audit or a CP2000 (IRC 6662).
  • Estimated tax penalty. For underpaying estimated taxes during the year (IRC 6654). Relief is narrower than for other penalties.
  • Information return and late partnership or S corporation return penalties. Including penalties for late Forms W-2 and 1099 and for late Forms 1065 and 1120-S, which are charged per partner or shareholder for each month.
  • International information return penalties. Large penalties for late or missing forms such as Forms 5471 and 3520, often charged automatically.

Interest is charged on most penalties from the date of the notice or the due date of the return. When a penalty is removed, the interest charged on that penalty is removed too.

First-time abatement

First-time abatement is an IRS administrative policy that removes failure-to-file, failure-to-pay, and failure-to-deposit penalties for one tax period if you have a good recent compliance history. You generally qualify if:

  • You had no significant penalties in the three years before the year at issue (an estimated tax penalty does not count against you)
  • You have filed all currently required returns or have a valid extension
  • You have paid the tax due or arranged to pay it, such as through an installment agreement that is current

First-time abatement does not require any explanation of why you were late. It does not apply to accuracy-related or estimated tax penalties. The IRS generally applies it to the earliest year with penalties, and using it can affect your eligibility in later years, so it often makes sense to ask first whether reasonable cause is available. The IRS explains the policy on its penalty relief page.

Reasonable cause

The IRS will remove many penalties if you show that you exercised ordinary business care and prudence but still could not comply because of circumstances beyond your control. Common examples include:

  • Serious illness or incapacity of the taxpayer or an immediate family member
  • Death in the immediate family
  • Fire, natural disaster, or other casualty
  • Inability to obtain records despite reasonable efforts
  • Reliance on incorrect written advice from the IRS
  • For accuracy-related penalties, reasonable good-faith reliance on a qualified tax professional’s advice after giving them complete information

The request needs a clear timeline: what happened, when it happened, how it prevented you from filing or paying, and what you did to comply once you could. Documents such as medical records, death certificates, or insurance claims make the request stronger. Some explanations rarely work on their own, such as forgetting, lack of funds, or relying on someone else to file on time. The Supreme Court held in United States v. Boyle that relying on an agent to file a return on time is generally not reasonable cause.

Other grounds for removing a penalty

  • The penalty was charged in error. For example, a payment was misapplied, an extension was overlooked, or the tax itself was wrong.
  • Disaster relief. When the IRS postpones deadlines for a federally declared disaster, such as a hurricane in South Carolina, penalties for the postponed period should not apply.
  • Missing supervisory approval. Many penalties proposed in an audit require written supervisory approval before they are first communicated to the taxpayer (IRC 6751(b)). A penalty without proper approval can be challenged.
  • Small partnership relief. Some small partnerships can avoid the late-filing penalty on Form 1065 under a long-standing IRS procedure.
  • Interest abatement. Interest generally cannot be removed for reasonable cause, but it can be reduced when it built up because of unreasonable IRS errors or delays in certain actions (IRC 6404(e)).

How we request penalty abatement, step by step

  1. Review the account. We file a power of attorney (Form 2848) and pull your IRS transcripts to see every penalty, the dates, and the interest charged on each.
  2. Choose the right grounds. We decide whether to use first-time abatement, reasonable cause, IRS error, or another ground for each year, and in what order, so you keep the most options for the future.
  3. Gather the support. We build the timeline and collect the documents that support it.
  4. Make the request. Depending on the penalty and the stage of the case, by phone, by letter, on Form 843, in response to an IRS notice, or during an audit or appeal.
  5. Appeal a denial. If the IRS denies the request, we can ask the IRS Independent Office of Appeals to review it, or pay the penalty and file a claim for refund that can be taken to court.
  6. Confirm the result. We check your transcripts to make sure the penalty and the interest on it were removed and any refund was issued.

Deadlines for penalty refunds

You can usually ask for abatement of a penalty you have not yet paid at any time while it is still owed. If you already paid it, a refund claim generally must be filed within three years after the return was filed or two years after the penalty was paid, whichever is later (IRC 6511). Penalties proposed in an audit are usually challenged during the audit, at IRS Appeals, or in the U.S. Tax Court after a notice of deficiency.

South Carolina penalties

The South Carolina Department of Revenue charges its own penalties for late filing and late payment of state taxes, and it has its own, separate process for requesting a penalty waiver. Removing a federal penalty does not remove the matching state penalty. If you owe penalties to both the IRS and SCDOR, we handle both requests, and state assessments can also be challenged through the SCDOR appeal process.

Attorney experience

The firm is led by attorney Daniel P. Knudsen, who has represented taxpayers in tax controversies for more than 10 years, including litigation before the U.S. Tax Court. Before entering private practice, Daniel represented taxpayers before the IRS at a Low Income Taxpayer Clinic funded through the IRS Taxpayer Advocate Service grant program, and worked in the Executive Division of a state department of revenue.

Daniel holds an LL.M. in Taxation and certificates in International Taxation and State and Local Taxation from Georgetown University Law Center, and completed the Tax Litigation Training Program, a professional certificate program, at Villanova University Charles Widger School of Law. Every penalty abatement request is prepared by an attorney.

Penalty abatement help throughout South Carolina

Our office is in Spartanburg, and we help clients with IRS penalty abatement throughout South Carolina, including Greenville, Columbia, Charleston, North Charleston, Mount Pleasant, and Rock Hill. Penalty requests are made by phone, mail, and fax, so you do not need to live near Spartanburg.

IRS penalty abatement questions

Can I get penalties removed if I still owe the tax?

Often yes. Reasonable cause can be requested while a balance is owed. First-time abatement generally requires that you have paid the tax or set up a payment arrangement, and the IRS may wait until the tax is paid to remove the full failure-to-pay penalty, since it keeps growing until then.

Does the IRS remove interest too?

Interest on a penalty is removed when the penalty is removed. Interest on the tax itself generally stays, except in limited situations involving IRS errors or delays.

Is not having the money to pay reasonable cause?

Usually not on its own for failure to file, because a return can be filed without payment. For failure to pay, financial hardship can support reasonable cause if you show you used ordinary business care and prudence and still could not pay, for example because of a sudden loss of income or major medical costs.

My tax preparer made the mistake. Does that count?

It depends on the penalty. Good-faith reliance on a professional’s substantive advice can be reasonable cause for an accuracy-related penalty. Relying on a preparer or agent to file or pay on time generally is not, but first-time abatement may still be available.

What if the IRS denies my request?

A denial letter usually explains your appeal rights. You can generally request review by the IRS Independent Office of Appeals, and a paid penalty can also be pursued through a refund claim and, if needed, a refund suit.

Related tax controversy services

Talk to a South Carolina IRS penalty abatement attorney

If the IRS has charged penalties you believe should be removed, call (803) 753-7376 or request a consultation. Tell us the notice number, the tax years involved, and the type of penalty. Please don’t include confidential details in the contact form. Submitting it does not create an attorney-client relationship.

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South Carolina Tax Law Firm PA is a private law firm and is not affiliated with the IRS, the South Carolina Department of Revenue, or any government agency. Attorney responsible for this content: Daniel P. Knudsen, 405 S. Pine St., Suite F, Spartanburg, SC 29302. This page provides general information, not legal advice. Every case depends on its own facts, and no particular outcome can be promised.

Reviewed by Daniel P. Knudsen, attorney, October 2026.

405 S. Pine St., Suite F, Spartanburg, SC 29302

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