Abatement of penalties or interest 8/21/04
Interest represents the "time value of money", i.e., the cost of not paying when due. The IRS can only abate interest for "undue ministerial delay". This does not include for example instances where the assigned IRS employee is gone for weeks in training or on vacation, but only "unusual" circumstances, e.g., the file was "lost behind the file cabinet" for an extended time.
Penalties can be abated based on "reasonable cause" under the "facts and circumstances" – e.g., whether you acted like a "reasonable person" would have acted in the circumstances to take care of your obligations (e.g., filing or paying), and whether imposing a penalty would not have had an impact in encouraging you to comply.
Favorable factors include:
- matters beyond your control that prevented your compliance;
- it was a first time error or failure to comply;
- you have otherwise been a compliant taxpayer and
- you acted promptly to correct the non-compliance when it became possible.
Sometimes the IRS requires the taxes, penalty and interest be paid in full before it will consider a request to abate penalties.