What is the failure-to-pay penalty rate before any notice of intent to levy?

0.5% of the unpaid tax per month or part of a month, up to 25%

0.25% of the unpaid tax per month or part of a month, up to 25% in all cases

Which requirement applies to first-time abatement relief?

No penalties (other than an estimated tax penalty) for the prior 3 tax years, all required returns filed, and the tax paid or arranged to be paid

The taxpayer must show reasonable cause

The penalty must be under $1,000

The taxpayer must be an individual

Which is generally accepted as reasonable cause for late filing?

Serious illness of the taxpayer or a death in the immediate family that prevented timely filing

Relying on a paid preparer to file the return, without ever checking whether it was actually filed

Lack of funds to pay a preparer

Can interest be abated for reasonable cause?

No; interest can be abated only in limited cases, such as unreasonable errors or delays by the IRS in performing a ministerial or managerial act, or when the underlying penalty is abated

No, interest can never be abated

Yes, whenever a penalty is abated for reasonable cause

A taxpayer relied on written advice from the IRS that was wrong and was penalized. What relief is available?

Abatement of the penalty under IRC 6404(f) for erroneous written advice from the IRS in response to a specific written request

Only an installment agreement, because penalties based on IRS advice can be abated only when the advice was given orally by phone

Which penalty generally cannot be removed with reasonable cause or first-time abatement?

The estimated tax penalty for individuals, except for casualty, disaster, or retirement after age 62 or disability with reasonable cause

How is interest on federal tax underpayments computed for individuals?

At the federal short-term rate plus 3 percentage points, compounded daily and adjusted quarterly

At a fixed 5% simple annual rate, computed on the original unpaid tax only and set once when the return is due

Penalties and penalty abatement

The failure-to-file penalty is 5% per month (max 25%) and the failure-to-pay penalty 0.5% per month (max 25%); they can be removed through first-time abatement (clean 3-year history) or reasonable cause, but interest is abated only in narrow cases like IRS delay or removal of the underlying penalty.

Updated 2026-09-23 · 4 sources · By the EnrolledAgentKit team

Exam part

Part 3

Representation, Practices and Procedures

IRS domain

Specific Areas of Representation

20 of 85 scored Qs

Tax year tested

2025

2026-27 SEE

Practice questions

10 free below

The rules the exam tests

Figures for tax year 2025, the year the 2026-27 SEE tests. Verify against the cited primary source.
Rule	What it says (2025)	Source
Failure to file	5% per month, max 25%; reduced by FTP for the same month	IRC 6651(a)(1), (c)
Failure to pay	0.5% per month, max 25%; 1% after levy notice; 0.25% during IA	IRC 6651(a)(2), (d), (h)
First-time abatement	FTF, FTP, FTD; no penalties prior 3 years (except ES), compliant	IRM 20.1.1.3.3.2.1
Reasonable cause	Ordinary business care: death, serious illness, casualty, records unavailable	IRC 6651(a); IRM 20.1.1
Not reasonable cause	Relying on an agent to file (Boyle), ignorance, lack of funds (usually)	U.S. v. Boyle (1985)
Erroneous IRS written advice	Mandatory abatement	IRC 6404(f)
Interest abatement	IRS ministerial/managerial error or delay	IRC 6404(e)
Interest suspension	No notice within 36 months of timely return	IRC 6404(g)
Estimated tax penalty	Waived only for casualty/disaster or retirement at 62+/disability with reasonable cause	IRC 6654(e)(3)
Request	Phone, notice response, or Form 843	IRS

Worked example

Facts: A taxpayer with no penalties in 2022-2024 files her 2025 return 3 months late (July 2026) owing $10,000, which she pays with the return.

Penalties: FTF 4.5% x 3 = 13.5% ($1,350) + FTP 0.5% x 3 = 1.5% ($150) = $1,500, plus interest. She qualifies for first-time abatement of both penalties; the interest on the tax stays, but interest on the abated penalties is removed.

Exam traps

Combined FTF + FTP is 5% a month, not 5.5%.
Reliance on a preparer to file is not reasonable cause; reliance on substantive advice may be.
Interest cannot be abated for reasonable cause.
FTA does not apply to accuracy-related penalties.