Interest is required by statute, but the IRS may reduce the amount of interest you owe if the interest is applied because of an IRS officer or employee's unreasonable error or delay. Who qualifies for interest abatement You must meet the following 6 criteria for your interest abatement request to qualify for unreasonable error or delay under IRC 6404(e)(1): File your claim 3 years from when the return was originally filed or 2 years from the payment date of tax, whichever is later. Request must be for interest abatement for tax years beginning after December 31, 1978. Request must pertain to interest on tax for income, estate, gift and certain excise taxes. You may not request interest abatement on employment taxes. Make sure the error or delay occurred after we contacted you in writing about an examination, underpayment, or payment. Neither you nor your representative contributed to the error or delay. Relate to an unreasonable error or delay that occurred (identified on a case-by-case basis) in relation to our performance of ministerial or managerial acts. Ministerial act A ministerial act is a procedural or mechanical act that does not involve the exercise of judgment or discretion, and that occurs during the processing of a taxpayer’s case after all prerequisites to the act, such as conferences and review by supervisors, have taken place. A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act. Ministerial act examples Example 1. A taxpayer moves from one state to another before the IRS selects the taxpayer's income tax return for examination. A letter explaining that the return has been selected for examination is sent to the taxpayer's old address and then forwarded to the new address. The taxpayer timely responds, asking that the audit be transferred to the IRS's local office that is nearest to the new address. The group manager timely approves the request. After the request for transfer has been approved, the transfer of the case is a ministerial act. The Commissioner may (at their discretion) abate interest attributable to any unreasonable delay in transferring the case. Example 2. An examination of a taxpayer's income tax return reveals a deficiency with respect to which a notice of deficiency will be issued. The taxpayer and the IRS identify all agreed and unagreed issues, the notice is prepared and reviewed (including review by Area Counsel, if necessary), and any other relevant prerequisites are completed. The issuance of the notice of deficiency is a ministerial act. The Commissioner may (at their discretion) abate interest attributable to any unreasonable delay in issuing the notice. Managerial act A managerial act is an administrative act that occurs during the processing of a taxpayer's case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel. A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act. Managerial act examples Example 3. A revenue agent is sent to a training course for an extended period of time, and the agent's supervisor decides not to reassign the agent's cases. During the training course, no work is done on the cases assigned to the agent. The decision to send the revenue agent to the training course and the decision not to reassign the agent's cases are not ministerial acts; however, both decisions are managerial acts. The Commissioner may (at their discretion) abate interest attributable to any unreasonable delay resulting from these decisions. Example 4. A revenue agent has completed an examination of the income tax return of a taxpayer. There are issues that are not agreed upon between the taxpayer and the IRS. Before the notice of deficiency is prepared and reviewed, a clerical employee misplaces the taxpayer's case file. The act of misplacing the case file is a managerial act. The Commissioner may (at their discretion) abate interest attributable to any unreasonable delay resulting from the case file being misplaced. Example 5. A taxpayer invests in a tax shelter and reports a loss from the tax shelter on the taxpayer's income tax return. IRS personnel conduct an extensive examination of the tax shelter, and the processing of the taxpayer's case is delayed because of that examination. The decision to delay the processing of the taxpayer's case until the completion of the examination of the tax shelter is a decision on how to organize the processing of tax returns. This is a general administrative decision. Consequently, interest attributable to a delay caused by this decision cannot be abated. Example 6. During the examination of an income tax return, there is disagreement between the taxpayer and the revenue agent regarding certain itemized deductions claimed by the taxpayer on the return. To resolve the issue, advice is requested in a timely manner from the Office of Chief Counsel on a substantive issue of federal tax law. The decision to request advice is a decision concerning the proper application of federal tax law; it is neither a ministerial nor a managerial act. Consequently, interest attributable to a delay resulting from the decision to request advice cannot be abated. Note: A general administrative decision, such as the IRS's decision on how to organize the processing of tax returns or its delay in implementing an improved computer system, is not a managerial act. How much interest may be abated Under IRC 6404(e)(1) we may only abate the amount of interest that accrues during the period in which the unreasonable error or delay occurred. Example: The taxpayer files a balance due income tax return. An audit resulted in additional liability (tax and penalty), and there was an unreasonable error (or delay) during the audit. The IRS would consider only the interest accruing on the audit liability (additional tax and penalty) for abatement due to the unreasonable error (or delay) and not interest on the underpaid original liability. How to request interest abatement To request we reduce or waive interest due to an unreasonable error or IRS delay, you or your representative must submit: Form 843, Claim for Refund and Request for Abatement PDF or A signed letter requesting that we reduce or adjust the overcharged interest. You should also include a detailed description and any supporting documents. State when and how the IRS caused a delay or error that contributed to an increased interest charge. For more information, see Instructions for Form 843 PDF. If you disagree with our determination of your interest abatement request, you can appeal the decision. Law IRC 6404(e)(1)
