How Does the IRS Calculate Penalties and Interest
The IRS will require that penalties and interest be paid in full before any abatement determination is made. Once you pay the bill, the 'meter' stops and you will not have additional interest charges accruing.
As a general rule of thumb, you may request an abatement of penalty if you show cause. Interest on late tax payments may not be abated except in extraordinary circumstances. Interest abatement almost always requires that the taxpayer prove an undue delay by an Internal Revenue Service staff member is the cause, in part, of the interest.
A taxpayer who voluntarily steps forward and corrects a deficiency in a previously filed return (NOT DISCOVERED IN AN AUDIT!) is often successful in requesting penalty abatement.
To request an abatement of penalty, write to the IRS office that issued the bill within the time frame provided by the IRS. Be certain to clearly and concisely describe the cause and provide any supporting documentation you might have. We have had many clients be successful in having late payment penalties abated with a statement as follows:
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