Penalty & Interest Abatement

The IRS can abate any portion of a penalty or addition to tax caused by erroneous advice furnished to you in writing by an officer or employee of the IRS acting in his or her official capacity.

The IRS will abate the penalty or addition to tax only if you reasonably relied on the written advice, the written advice was in response to a specific written request for advice made by you (or your representative who is allowed to practice before the IRS), and the penalty or addition to tax did not result from your failure to provide the IRS with adequate or accurate information.

The IRS can abate interest if the interest is caused by IRS errors or delays, but will abate the interest only if there was an unreasonable error or delay in performing a managerial or ministerial act.  The taxpayer cannot have caused any significant aspect of the error or delay. In addition, the interest can be abated only if it relates to taxes for which a notice of deficiency is required. This includes income taxes, generation-skipping transfer taxes, estate and gift taxes, and certain excise taxes. Interest related to employment taxes or other excise taxes cannot be abated.

The term “managerial act” means an administrative act that occurs during the processing of your case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel.

The term “ministerial act” means a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of your case after all prerequisites of the act, such as conferences and review by supervisors, have taken place.  

The IRS can also abate a penalty if you show can Reasonable Cause

Reasonable cause is based on all the facts and circumstances in each situation and allows the IRS to provide relief from a penalty that would otherwise be assessed. Reasonable cause relief is generally granted when the taxpayer exercises ordinary business care and prudence in determining their tax obligations but nevertheless failed to comply with those obligations.  Reasonable cause relief is not available for all penalties; however, other exceptions may apply.  

The IRS considers the following in conjunction with other specific criteria identified in the Internal Revenue Manual:

• What happened and when did it happen?
• During the period of time the taxpayer was non-compliant, what facts and circumstances prevented the taxpayer from filing a return, paying a tax, and/or otherwise complying with the law?
• How did the facts and circumstances result in the taxpayer not complying?
• How did the taxpayer handle the remainder of their affairs during this time?
• Once the facts and circumstances changed, what attempt did the taxpayer make to comply?
• Reasonable cause does not exist if, after the facts and circumstances that explain the taxpayer’s noncompliant behavior cease to exist, the taxpayer fails to comply with the tax obligation within a reasonable period of time.

Reasonable cause can be for Ordinary Business Care and Prudence; Erroneous Advice from the IRS; Death, Serious Illness, or Unavoidable Absence; Fire, Casualty, Natural Disaster, or Other Disturbance; Unable to Obtain Records; Mistake was Made; Ignorance of the Law; Forgetfulness; Statutory Exceptions and Administrative Waivers; Advice from a qualified tax advisor; and Undue Hardship.

Our enrolled agent can prepare and submit the proper paperwork and documentation to the IRS.  Call us to find out if you may qualify for any penalty and interest abatements.