Penalties can add up fast on delinquent taxes. In some cases, the IRS will abate a penalty if an IRS error is discovered when assessing the penalty. Form 843 (Claim for Refund and Request for Abatement) is used to either request a refund of an erroneous penalty or to ask the IRS to erase a penalty prior to payment. The way the law is written you must ask for the abatement, then pay the penalty and ask for a refund.
Abatement will be granted if the IRS finds that the penalty imposed is excessive, was imposed after the statute of limitations for penalties expired, or is erroneous or illegal.
A spouse who receives innocent spouse relief does not receive a technical abatement. Instead the spouse’s taxes are reduced to zero and all tax, penalties and interest are erased.
The IRS can also abate interest for many of the same reasons it abates penalties. For instance, interest will be abated if the IRS made an error in computing taxes owed or assessed taxes for someone living in a federally declared disaster area. Interest can also be abated if it accrues because the IRS took excessive time to compute a tax or penalty because of an unreasonable error or bureaucratic bumbling on its part.
The challenge is to determine what, if any, errors the IRS made which can justify an abatement of interest or penalties. Errors can be found by careful review of tax transcripts by a tax attorney.
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