Requesting Abatement of Interest Due to IRS Error or Delay
Clients will typically ask me if interest can be abated after I successfully abated all the IRS tax penalties. Unfortunately, interest cannot be abated for reasonable cause like penalties can. However, the interest charged on a penalty will be reduced or removed when that penalty is reduced or removed. If an unpaid balance remains on your account, interest will continue to accrue until the account is fully paid.
The IRS can abate interest if the interest is caused by IRS errors or delays. The IRS will abate the interest only if there was an unreasonable error or delay in performing a managerial or ministerial act. 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. An example would be if the auditor was assigned to a three month detail in the middle of handling your case and your case was not reassigned and just sat for three months until the auditor returned.
The term “ministerial act” means a procedural or mechanical act that does not involve the exercise of judgment or discretion and occurs during the processing of your case after all prerequisites of the act, such as an appeal conference and review by supervisors have taken place. For example if the IRS never sends you a final exam report or a statutory notice of deficiency at the conclusion of your conference with Appeals that would constitute IRS delay.
Remember that you 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.
You would have to file Form 843 to formally request an abatement of interest on your federal liability and indicate the dates of any payment of interest on the tax liability. If you need help filing the Form 843 call Gregory J. Spadea at 610-521-0604 of the Law Offices of Spadea & Associates, LLC located in Ridley Park, Pennsylvania.