In 2011, the IRS issued the most penalties since the early 1980s with 38.6 million penalties against individuals and businesses! The IRS Data Book 2011, Table 17, page 42 shows that the majority of these penalties were issued for:
You have a specific statutory right to have these penalties canceled under certain circumstances. However, the IRS rarely explains to people the rights they have to challenge any penalties.
Furthermore, there is an administrative waiver called the “First-Time Abate” (FTA) policy. It is expressed in the Internal Revenue Manual section 188.8.131.52.6.1(1). This is the IRS' best kep secret since 2001!
This policy provides that a person with a clear compliance history in the prior three years, including if he/she were not required to file a return, does not have to prove “reasonable cause” to have his/her penalties canceled. In other words, you can cancel your penalties this one time just by asking for it!