Abatement of Penalties & Interest

There are multiple penalties that the Internal Revenue Service can impose on the Taxpayer. The principal penalties in the collection area are: the penalty for failure to file a return, the penalty for failure to pay a tax, and the penalty for failure to deposit taxes. Each of these penalties may be abated if the Taxpayer can show that the failure was due to reasonable cause. While there is no precise definition as to what constitutes reasonable cause, the Internal Revenue Service has established certain criteria and each case should be evaluated carefully to determine if an abatement of penalty is possible.

The likelihood of having a reasonable cause explanation accepted is, obviously, greatly enhanced by having competent proof and/or documentation regarding the facts underlying the reasonable cause explanation. Also critical is that the Taxpayer has not availed himself or herself in the past of reasonable cause abatements, at least on a systematic or frequent basis.

Where the Internal Revenue Service has made an error or there has been an unreasonable delay in assessment as a result of “performing a ministerial or managerial act,” the Taxpayer may request abatement of interest by the Internal Revenue Service. If the Internal Revenue Service refuses to abate the interest, the Tax Court has been granted specific jurisdictional authority to determine if interest should be abated.