Penalty Abatement
Most often, when the IRS assesses taxes due or additional taxes due after a review or an audit, the taxpayer will receive a collection notice that includes penalties and interest. The interest due is calculated on the new assessment of taxes from the date that those taxes would have been due and should have been paid by the taxpayer.
Unfortunately, when the IRS adds a penalty based on “failure to file” or “negligence”, they calculate interest on the penalty as well. So, there are actually two potential parts of penalty abatement that can be addressed to reduce the taxpayer’s bill under certain conditions.
The first type of appeal for the taxpayer to have the IRS waive a penalty is “reasonable cause.” The Internal Revenue Manual lists at least seven definitive reasons that if substantiated by the taxpayer, may result in the IRS reducing or waiving an assessed penalty and the interest on the penalty.
The second type of appeal for penalty abatement is one that the IRS does not talk about and is only available under certain conditions and if requested by the taxpayer or his representative such as Tax Relief Assistance, LLC.
Another possible opportunity to get the IRS abate interest on penalty require the taxpayer to document and prove unreasonable delay or error on the part of the IRS. I am sure most people think this never happens, but it happens more often as the IRS is currently short-staffed and underfunded.
Tax Relief Assistance keeps a comprehensive timeline and record of communication to and from the IRS for each client allowing us to tax advantage of an unreasonable delay by the IRS on behalf of our client.