Does First-Time Abatement cover accuracy penalties?

No — it covers failure-to-file, failure-to-pay, and failure-to-deposit. Accuracy penalties need reasonable cause.

What is substantial authority?

Roughly a 40% likelihood of success — the default position-taking threshold that avoids the penalty without disclosure.

Can relying on my preparer defeat it?

Yes, if the reliance was reasonable: full disclosure, a competent professional, and no reason to doubt the advice.

IRC §6662 · 26 U.S.C. §6662

IRC §6662: Accuracy-Related Penalty

By Paul D. Diaz, EA, MBA · Updated September 20, 2026

IRC §6662 imposes a 20% accuracy-related penalty on underpayments from negligence or substantial understatement — 40% for gross valuation misstatements. Disclosure and reasonable cause with good faith can defeat it; bare optimism cannot.

What it governs

Substantial understatement: the greater of $5,000 or 10% of the tax
Negligence: positions without a reasonable basis
Valuation tiers: 20% substantial, 40% gross misstatements
Reasonable-cause plus good-faith defense with documentation

In the GuideFull treatment in Chapter 21 of the Guide — THE TAX CUTTERY® Guide to Federal Income Taxation, Professional Edition (564 pages, 24 chapters).

From the practiceAbatement in 4 steps →

Questions this section answers

Does First-Time Abatement cover accuracy penalties?: No — it covers failure-to-file, failure-to-pay, and failure-to-deposit. Accuracy penalties need reasonable cause.
What is substantial authority?: Roughly a 40% likelihood of success — the default position-taking threshold that avoids the penalty without disclosure.
Can relying on my preparer defeat it?: Yes, if the reliance was reasonable: full disclosure, a competent professional, and no reason to doubt the advice.

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