The Truth About Penalty and Interest Abatement with the IRS

Do you have a balance due with the IRS? If you do, it is likely that the balance includes penalties and interest. Included among the various penalties that may apply are penalties for late filing and for failure to timely pay the tax due. Under certain circumstances, each of these penalties can be up to a maximum of 25 percent of the unpaid tax. For example, if you had unpaid tax of $10,000 and the maximum penalties applied, the balance due with the IRS, before interest, could be approximately $15,000. As you can see, these amounts can add up quickly. There are options to obtain penalty abatement/waiver and for interest abatement. But not all taxpayers will qualify for relief. An experienced tax attorney can help you negotiate the potential abatement of the penalties assessed on your account.

Penalty Abatement Options

There are three main avenues to obtain penalty abatement/waiver.

1. First Time Penalty Abatement. If the following are true, you may qualify for administrative penalty relief from penalties for failure to timely file, failure to timely pay or failure to deposit taxes:
   1. you did not previously have to file a return or you had no penalties assessed against you for the previous three (3) filing years
   2. you are current in your filing requirements or you have filed an extension of time to file for the current year
   3. you have paid or have arranged to pay any tax due

   Interest Abatement/Reduction Options

   The IRS charges interest on all unpaid balances. Interest accumulates daily and is charged until the balance is paid in full. If any of the tax and/or penalties are reduced, the IRS will automatically reduce the related interest. Interest is statutory, however, and cannot be reduced or removed for reasonable cause or as a first time abatement. The only way that the IRS will reduce the amount of interest that you owe is if the interest is due to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act. To see if you may be entitled to interest abatement, you should consult with a tax attorney.