If you are looking to only eliminate the interest added to the tax liability, this requires a focused approach. The Internal Revenue Code authorizes abatement of interest under limited circumstances. Internal Revenue Code section 6404(e) provides only two conditions under which interest is forgiven: (I) unreasonable error by the IRS, or (II) unreasonable delay by the IRS. In the Senate Report on the first Taxpayers’ Bill of Rights Act, Congress stated that interest should be abated where failure to do so would be considered as “grossly unfair.” Therefore, your case must stress that the interest is fundamentally unfair.
Examples of interest elimination: (a) The IRS failed to notify you of a tax due for months or years and interest accrued during that time through no fault of yours. (b) The IRS misapplied payments to your account. (c) The IRS sent correspondence to the incorrect address. (d) The IRS lost documents. (e) The IRS gave erroneous written advice, on which you relied, costing you interest.
Complete Form 843 to eliminate interest. On the form cite Internal Revenue Code section 6404(e) if your request is based on IRS error or delay. If your request is based on erroneous advice by the IRS, cite section 6404(f). Include all written correspondence from the IRS and supporting documentation. Mail Form 843 and attach your written demand letter. Never send originals. Mail by certified mail to the Interest Abatement Coordinator at the service center where your returns are filed. Keep copies!
Now, as with just about every tax problem, there is more than one way to solve the problem, and that includes how you go about dealing with interest. Consider other solutions like bankruptcy and an offer in compromise and partial pay to resolve interest as well as the penalties and tax liability.
Call us for a free tax problem solving analysis. And many also benefit from our free book, How to Get Tax Forgiveness.