Abatement of interest final regs.

• Author: Hayes, Paul
• Position: IRS regulations

Under the Taxpayer Bill of Rights 2, interest on tax deficiencies or late payments can be abated due to unreasonable IRS errors or delays attributable to managerial or ministerial acts. A managerial act is defined as an administrative act involving the temporary or permanent loss of taxpayer records or matters of judgment or discretion relating to personnel management; a ministerial act is a procedural or mechanical act not involving the exercise of judgment or discretion.

For abating interest, the Service must have contacted the taxpayer about the deficiency and no significant aspect of any error or delay can be attributable to the taxpayer or a related party (as defined in Sec. 267).

Regulations issued in January 1998 include numerous examples that clarify when the abatement provisions will or will not apply. Generally, unreasonable delays caused by personnel decisions (such as training, sick leave or auditor reassignment) can allow interest abatement. On the other hand, delays caused by the IRS's need to accurately calculate the tax are not grounds for abatement. For example, the delay in completing an individual's audit, attributable to completing the audit of a passthrough entity in which the taxpayer has invested, is not a basis...