Abatement of Interest and Penalties
TAXPAYER BILL OF RIGHTS II
4. TITLE III--ABATEMENT OF INTEREST AND PENALTIES
4.1. Expansion Of Authority To Abate Interest. The new law permits the IRS to abate interest with respect to any unreasonable error or delay resulting from managerial acts as well as ministerial acts. This would include extensive delays resulting
from managerial acts such as: the loss of records by the IRS, IRS personnel transfers, extended illnesses, extended personnel training, or extended leave. On the other hand, interest would not be abated for delays resulting from general administrative
decisions. For example, the taxpayer could not claim that the IRS's decision on how to organize the processing of tax returns or its delay in implementing an improved computer system resulted in an unreasonable delay in the Service's action on the
taxpayer's tax return, and so the interest on any subsequent deficiency should be waived. The provision applies to interest accruing with respect to deficiencies or payments for taxable years beginning after the date of enactment. TPBR2 §301. IRC §6404(e). SEC. 301 OF THE BILL
4.2. Review Of IRS Failure To Abate Interest. The new law grants the Tax Court jurisdiction to determine whether the IRS's failure to abate interest for an eligible taxpayer was an abuse of discretion. The Tax Court may order an
abatement of interest. The action must be brought within 180 days after the date of mailing of the Secretary's final determination not to abate interest. An eligible taxpayer must meet the net worth and size requirements imposed with respect to awards of
attorney's fees. No inference is intended as to whether under present law any court has jurisdiction to review IRS's failure to abate interest. The provision applies to requests for abatement after the date of enactment. TPBR2 §302. IRC §6404(g). SEC. 302 OF THE BILL
4.3. Extension Of Interest-Free Period For Payment Of Tax After Notice And Demand. The new law extends the interest-free period provided to taxpayers for the payment of the tax liability reflected in the notice from 10 calendar days to
10 business days (21 calendar days, provided that the total tax liability shown on the notice of deficiency is less than $100,000). The provision applies in the case of any notice and demand given after December 31, 1996. TPBR2 §303. IRC §6601(e) and §6651(a). SEC. 303 OF THE BILL
4.4. Abatement Of Penalty For Failure To Make Required Deposits Of Payroll Taxes In Certain Cases. The new law provides that the Secretary may waive this penalty with respect to an inadvertent failure to deposit any employment tax if:
(a) the depositing entity meets the net worth requirements applicable for awards of attorney's fees, (b) the failure to deposit occurs during the first quarter that the depositing entity was required to deposit any employment tax, and (c) the return for
the employment tax was filed on or before the due date. The new law also provides that the Secretary may abate any penalty for failure to make deposits for the first time a depositing entity makes a deposit if it inadvertently sends the deposit to the
Secretary instead of to the required government depository. The provision is effective for to deposits required to be made after the date of the enactment. TPBR2 §304. IRC §6656(c) and (d). SEC. 304 OF THE BILL
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