20.2.7. Abatement and Suspension of Debit Interest

(1) Purpose: This IRM provides policy guidance for abatement and suspension of underpayment interest for most cases and return types. For other interest policy guidance, refer to other sections of IRM 20.2, Interest.

(2) Audience: This information is for all employees and managers who work with underpayment interest, including employees and managers in:

• Small Business Self-Employed (SB/SE) Division,

• Large Business and International (LB&I) Division,

• Tax Exempt and Government Entities (TE/GE) Division,

• Wage and Investment (W&I) Division,

• Independent Office of Appeals (Appeals),

• Taxpayer Advocate Service (TAS), and

• Other IRS functions.

(3) Policy Owner: Responsibility for overseeing abatement and suspension of underpayment interest resides with SB/SE, Operations Support (OS), Business Support Office (BSO).

(4) Program Owner: The Office of Servicewide Interest (OSI) is responsible for abatement and suspension of underpayment interest policy and IRM 20.2, Interest. OSI’s role is to ensure the accuracy of interest and its fair and consistent application. OSI has overall responsibility for coordinating and approving any update to IRM 20.2, Interest, including IRM 20.2.7, Abatement and Suspension of Debit Interest.

(1) This is an overview of the most common types of interest abatement and suspension provisions, the applicable code sections, and the IRM reference for further guidance.

(2) The abatement and suspension of underpayment interest is authorized by the Internal Revenue Code. Reasonable cause is never a basis to abate interest.

(3) Interest abatement and suspension provisions that may affect only part of the balance due include the following:

1. Non-compute Returns per IRC 6014: IRC 6151(b) is an exception to the payment of tax by the return due date. See IRM 20.2.7.4.2.

2. Employment Tax Returns per IRC 6205: Allows an underpayment interest-free period from the original due date until the received date of the adjusted return or agreement, if the tax is paid in full. See IRM 20.2.10.6.1, Underpayment Adjustments on Employment Taxes.

3. Not Legally Due per IRC 6404(a): Allows the abatement of interest that is excessive, assessed after the statute of limitations, or is illegally or erroneously assessed. See IRM 20.2.7.3.

4. Errors on IRS Prepared Returns per IRC 6404(d): Allows an abatement of interest attributable to certain math errors made during IRS tax preparation. See IRM 20.2.7.4.1.

5. Ministerial and Managerial Acts per IRC 6404(e)(1): Allows an abatement of interest for unreasonable errors and delays by the IRS in performing a ministerial or managerial act. See IRM 20.2.7.5.

6. Erroneous Refunds per IRC 6404(e)(2): Allows an abatement of interest on the repayment of an erroneous refund of $50,000 or less. See IRM 20.2.7.7.

7. Failure to Timely Contact Taxpayer per IRC 6404(g): Suspends the interest if the IRS does not timely (36 or 18 months) notify the taxpayer of a proposed liability. See IRM 20.2.7.8.

8. A Waiver of Restrictions on Assessment and Collection triggers IRC 6601(c): Suspends interest if the IRS fail to issue a notice and demand within 30 days after a filed IRC 6213(d) waiver. See IRM 20.2.7.9.

9. Payments made within specified period after notice and demand per IRC 6601(e)(3): Suspends interest past the notice and demand date on the underpayment amount that is equal to the payment made within 21 calendar days (10 business days if the amount for which such notice and demand equals or exceeds $100,000) of a notice and demand date. See IRM 20.2.7.10.

10. Bankruptcies: Rules vary for pre and post petition interest including the different bankruptcy chapters. See IRM 20.2.11.6.1, Insolvent Taxpayers, also known as Bankruptcy Code Cases.

(4) Interest abatement and suspension provisions affecting the entire balance due are described as follows:

1. Combat Zone per IRC 7508: Disregards the combat zone period plus up to 105 (106 leap year) additional days, depending on the circumstances. See IRM 20.2.7.11.

2. Military Deferment per Title 50, Section 4000 United States Code (USC): Defers payment of a liability for up to 180 days for a qualified taxpayer. See IRM 20.2.7.12.

3. Declared Disaster, Terroristic, or Military Action per IRC 7508A: Postpones certain tax acts that are due during a period of a federally declared disaster, terroristic or military action. See IRM 20.2.7.13.

(5) For accounts that qualify for the above provisions, follow the applicable IRM instructions for that provision to ensure correct application of the interest laws. Remember, reasonable cause is never the basis for abating interest.

(1) IRC 6404(a) is the authority to abate the unpaid portion of any tax or liability, such as interest, which

• is excessive in amount, or

• is assessed after the statutory period of limitations has expired, or

• is erroneously or illegally assessed.

(2) IRS employees are obligated to correct interest errors discovered on taxpayer accounts without the taxpayer having to file a request. For interest errors, the module does not need to be in zero balance in order to correct the identified interest error.

(3) Listed below are the steps to follow to correct an IRC 6404(a) interest error:

1. Notify your manager of the error, and document the error on the history sheet or by available electronic means.

2. Prepare applicable adjustment document(s) to correct the error.

3. Secure required approval(s) and signature(s) on adjustment document(s).

4. Attach documentation of the error and the interest computation (if applicable) to adjustment document(s).

5. Access account command code (CC) TXMODA to make sure the adjustment(s) posted to the module and corrected the interest on the module.

(1) There are two separate Internal Revenue Code provisions for interest relief requests that have the same interest relief period. Provisions apply only to corrections made to the original tax. Interest relief does not apply to subsequent tax adjustments resulting from an amended return or an examination.

(1) IRC 6404(e)(1) gives the IRS discretion to abate interest on an underpayment where an IRS employee caused an unreasonable error or delay and the taxpayer (or representative) did not significantly contribute to the error or delay. IRC 6404(e)(1) does not apply to employment taxes.

(2) A "ministerial act" is a procedural or mechanical act that does not involve the exercise of judgment or discretion and occurs while a taxpayer's case is pending after all prerequisites to the act, such as conferences and reviews by supervisors, have taken place.

(3) A "managerial act" is an administrative act that occurs while processing a taxpayer's case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel.

(4) Under IRC 6404(e)(1), the IRS may abate the amount of interest that accrues during the period in which the unreasonable error or delay occurred. The provision applies only when an unreasonable error or delay occurred after the date the IRS contacts the taxpayer in writing with respect to an audit deficiency or payment. Do not abate interest accruing from the return due date up to the date when the IRS first contacts the taxpayer.

(5) TEFRA/Partnerships-IRC 6404(e)(1) applies to partnership/TEFRA examinations:

1. If the interest abatement request alleges that an unreasonable error or delay occurred during the examination of a partnership return and the ministerial or managerial act criteria applies, then the determination may be applicable to every partner.

2. If the interest abatement request alleges that an unreasonable error or delay occurred after the close of a partnership examination, apply the ministerial or managerial act criteria to each partner's interest abatement request and determine allowance on a case by case basis.

(6) All IRS employees are responsible for identifying significant errors or delays associated with the ministerial and managerial acts that occur during work in progress. Employees are obligated to report unreasonable errors or delays to their manager.

(1) An interest abatement coordinator (IAC) reviews the facts and circumstances of an interest abatement request and makes a determination based on those facts, established procedures, and relevant tax laws. An IACs duties vary throughout the IRS and may include some of the following activities:

1. Maintain inventory controls (manual or electronic).

2. Review interest abatement requests and make preliminary determinations.

3. Request necessary documentation, which may include securing the case file.

4. Work interest abatement requests relating to IRC 6404(e)(1).

5. Identify the dates (from and to) where interest should be abated or suspended.

6. Secure approval of a proposed decision following the operating division's established guidelines.

7. Communicate the decision to the taxpayer using appropriate correspondence.

8. Confirm the correctness and completion of the adjustments.

9. Provide status updates upon request.

(2) lACs issue determinations for requests made pursuant to IRC 6404(e)(1), which are approved by a delegated authority identified in Delegation Order 20-1. IACs issue notice of final determinations on interest abatement requests that are automatically disallowed by law. For example, a request for abatement of interest for reasonable cause, on an employment tax liability, or for tax year 1978 (and prior).

(3) Taxpayers who disagree with the interest charges on the notice and demand must contact the person whose name and contact information are printed on the notice received from the IRS, and not the IAC. Interest Abatement Coordinators (IACs) work only IRC 6404(e)(1) interest abatement requests. The names and contact information of the Interest Abatement Coordinators are found in the Interest Knowledge Base - Interest Abatement Coordinators.

(1) Generally, interest is assessed on an erroneous refund recoverable by suit from the refund date to the repayment date. See IRC 6532(b), IRC 6602, and IRC 7405. IRC 6404(e)(2) requires the abatement of interest charged from the refund date to the date of demand for repayment if that refund is $50,000 or less and the taxpayer (or a related party) did not in any way cause the erroneous refund.

(2) For erroneous refunds greater than $50,000, the abatement of interest under IRC 6404(e)(2) is not required but may be allowed on a case by case basis.

(3) The IRS has discretionary authority to abate interest on erroneous refunds that exceed $50,000. The erroneous refund function (or function working the erroneous refund case) should consult, through managerial channels, with Counsel.

(4) Employees making the determination on erroneous refunds should consider the following facts and circumstances:

1. Did the taxpayer (or representative) cause or contribute to the error or delay?

2. Did the taxpayer (or representative) fail to return the erroneous refund for a significant period of time after discovery of the error or after the taxpayer (or representative) reasonably should have discovered the error?

3. Did the taxpayer (or representative) return the erroneous refund before the IRS notified the taxpayer of the error?

4. Is the taxpayer (or representative) sophisticated in tax or business matters?

(5) IRC 6404(e)(2) does not authorize the abatement of interest accruing from the date of demand to the repayment date, but interest may be suspended under a different interest provision. See IRC 6601(e)(3) in IRM 20.2.7.10, Notice and Demand Suspension. A repayment received within 21 calendar (or 10 business days if the amount for which such notice and demand is made equals or exceeds $100,000) days from the erroneous refund demand date must post with a Transaction Code (TC) 720 in order for Master File (MF) to correctly suspend interest from the date of demand to the repayment date.

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(7) For more information on erroneous refund processes and procedures, refer to the following manuals:

• IRM 3.17.80, Accounting and Data Control, Working and Monitoring Category D, Erroneous Refund Cases in Accounting Operations.

• IRM 21.4.5, Refund Inquiries, Erroneous Refunds.

(1) IRC 6404(g) suspends interest if, as a result of an examination, the IRS fails to timely provide the taxpayer adequate notice of liability and the basis for the liability. The IRS has 36 months (or 18 months in certain cases) from the return due date (without regard to extensions) or the return filed date, whichever is later, to notify the taxpayer of the additional liability without suspending interest. The IRC 6404(g) interest suspension applies only to timely filed individual income tax returns for taxable years ending after July 22, 1998, per IRC 7502. A timely filed return for this purpose includes one filed in accordance with an extension.

(2) The IRC 6404(g) interest suspension applies to an increase in liability for any taxes reportable on a Form 1040, U.S. Individual Income Tax Return, and therefore would apply to an individual's liability as a result of an adjustment to a flow-through entity or Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) adjustment. If it is determined that a carryback allowance (tentative carryback refunds (TENT) or restricted interest carryback claims (RINT)) was excessive, no suspension under IRC 6404(g) is allowed when the excessive amount is reassessed (including, if applicable, its associated interest and penalty charges).

1. TENT: Form 1045, Application for Tentative Refund

2. RINT: Form 1040-X, Amended U.S. Individual Income Tax Return

(3) Section 8242 of the Small Business and Work Opportunity Tax Act of 2007 (SBWOTA), extended the IRC 6404(g) notification period to 36 months for notices issued after November 25, 2007. See IRM 20.2.7.8.3 for examples of how to determine a 36-month (or 18-month) notification period.

(4) Rev. Rul. 2005-4, 2005-4 IRB 366, extended IRC 6404(g) interest suspension rules to amended returns (or signed correspondence) received on or before December 21, 2005. The start of the 18-month period applicable for amended returns is the return due date or return filed date of the original tax return. If a taxable amended return is received after 18 months from the original return due date (or filed date), interest on the amended return liability is suspended 18 months after the original return due date (or filed date) up through 21 days after receipt of the amended return.

(5) Section 303(b) of the Gulf Opportunity Zone Act of 2005 (GOZA), changed the notification period start date for amended returns received on or after December 21, 2005. For amended returns received on or after December 21, 2005, the 18-month notification period begins on the date the IRS received the amended return. Therefore, amended returns received on or after this date no longer qualify for IRC 6404(g) interest suspension because receipt of the amended return is the start of the 18-month notification period, and the amended return itself is the 6404(g) notice.

(1) Per IRC 6601(c), a deficiency as defined in IRC 6211 (relating to income, estate, gift and certain excise taxes) qualifies for an interest suspension if a notice and demand for payment is not issued within 30 days after a filed waiver, that is either (1) IRS receives a signed waiver (both spouses must sign the waiver on married filing joint returns), or (2) a waiver is executed by an IRS official.

(2) Do not compute interest on the deficiency (or on the interest on the deficiency) for the period beginning on the 31st day after the waiver filing date and ending on the notice and demand date (typically the 23C date). Since Master File (MF) programming will suspend underpayment interest during this period, it is not necessary to manually compute interest on the tax module for this reason alone. However, Master File programming cannot accurately compute interest involving more than one IRC 6601(c) suspension period. Therefore, manually compute interest on those tax modules and assess interest with TC 340 or a non-restricting TC 340. For more information on the use of a non-restricting TC 340, see IRM 20.2.5.6.3, Non-Restricting Transaction Code (TC) 340.

(3) The most common waiver form is Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment. Thus, agreements are often referred to as 870 waivers. Other forms used by the IRS for applying IRC 6601(c) include but are not limited to the following:

1. Form 870 AD, Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment.

2. Form 890, Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment-Estate, Gift, and Generation-Skipping Transfer Tax.

3. Form 4089, Notice of Deficiency-Waiver.

4. Form 4549, Income Tax Examination Changes.

(4) For TEFRA tax years starting after August 5, 1997, if an agreement is secured on Form 870 PT, Agreement for Partnership Items & Partnership Level Determinations as to Penalties, Additions to Tax, and Additional Amounts, Form 870 LT, Agreement for Partnership Items & Partnership Level Determinations as to Penalties, Additions to Tax, and Additional Amounts and Agreement for Affected Items, Form 870 PT (AD), Settlement Agreement for Partnership Items and Partnership Level Determinations as to Penalties, Additions to Tax, and Additional Amounts, or Form 870 LT (AD), Settlement Agreement for Partnership Items and Partnership Level Determinations as to Penalties, Additions to Tax and Additional Amounts and Agreement for Affected Items, the agreement date is the date the form is executed by an IRS official (or signed on behalf of the Commissioner). For more information on TEFRA agreements, see IRM 4.31.2.6.2.8, Agreed Cases, and IRM 4.31.3.12.7, Completion of Form 5344 - Examination Closing Record.

(5) Excise tax imposed by Chapters 41 through 44 (IRC 4911 through IRC 4982) are subject to deficiency procedures and therefore qualify for IRC 6601(c) interest suspension.

(6) The date the IRS receives a signed waiver or executes the waiver on behalf of the Commissioner is displayed in the "870-DATE>" field on the transcript of account (TXMODA, IMFOLT OR BMFOLT). For Automated Underreporter Programs (AUR) agreed adjustments, the waiver date shows in the "CR-INT-DT>" field on the transcript of account. See IRM 4.19.3.21.10.1(8), The Assessment Window, for additional information.

(1) When a notice and demand is issued for a balance due, the taxpayer has a limited time period to pay the amount shown before additional interest resumes. See IRC 6601(e)(3).

1. For notice and demand issued before January 1, 1997, if the amount shown on the notice is paid within 10 calendar days, additional underpayment interest was not computed.

2. For notice and demand issued after December 31, 1996, follow the "If/And/Then" chart below:

Notice grace period

If the amount shown on the notice	And	Then
is less than $100,000	is paid within 21 calendar days,	additional interest is not computed.
equals or exceeds $100,000	is paid within 10 business days,	additional interest is not computed.

(2) The notice grace period only applies after a notice and demand for payment goes out to the taxpayer showing an amount owed (including accruals). It does not apply to payments made before there is an assessment of tax, even if the payment posted as a TC 670.

(3) The issuance of notice and demand is identified on Master File or IDRS by Notice Status Codes 19, 20, 21, 54, 56, and 58.

(4) A Collection due process notice allows 30 days to pay. Per IRC 6330 these notices are delivered to the taxpayer before the property is levied or seized. This condition is identified by Transaction Code (TC) 971, Action Code (AC) 069. Additionally, the Federal Payment Levy Program (FPLP), identified by TC 971 AC 169, allows 30 days to pay. The FPLP attaches federal disbursements due an individual or business, such as, retirement, vendor/contractor payments, and social security.

(5) Offsets from another module of the same or a different taxpayer are to be treated as payments when determining if the notice grace period applies. This applies to offsets of overpayments, as well as offsets of overpayment interest. See IRM 20.2.5.13, Underpayment Interest on Liabilities Paid by Credit/Offset.

(6) U.S. taxpayers living overseas (including Puerto Rico) have 45 days ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to pay any notices. The 45-day grace period is automatically applied by the IRS computer systems when a foreign address is present; this includes APO, FPO, and DPO addresses. When interest is manually computed, the 45-day grace period must be used instead of the normal 10/21 days for U.S. taxpayers who live in a foreign country.

(7) IRC 6603deposits are remittances made prior to a notice date. They stop interest, but are not considered payments in lieu of an agreement. Thus, they generally don’t receive the notice grace period under IRC 6601(e)(3), unless the remittance was processed incorrectly. For example, the remittance posted as a TC 640, when it should have posted as a TC 670. See IRM 20.2.4.8.2, IRC 6603 Deposits, for more information.

(1) IRC 7508 prescribes a period of time to disregard when determining the liability of individuals who serve in a combat zone (CZ). Disregard interest accrual during the time period a taxpayer is located in one of the following:

1. An area designated as a combat zone.

2. A contingency operation designated by the Department of Defense (DOD).

3. A qualified hazardous duty area as defined by Congress.

4. Direct support of military operations in a combat zone certified by the DOD.

(2) A Master File (MF) -C freeze on a module indicates a combat zone participant. The MF -C freeze remains on the account even after the taxpayer is no longer active in a CZ. When working an account that contains a MF -C freeze, additional research is required to determine the taxpayer's CZ status.

(3) A combat indicator of "1", on the entity portion of a taxpayer’s account, identifies a taxpayer currently serving in a combat zone. Any compliance activity such as assessing or collecting tax is prohibited. However, if the taxpayer has other issues or requests information, you may work these other issues and contact the taxpayer, if needed. A combat indicator of "2" is a taxpayer who is no longer in a combat zone. Refer to your functional area IRM when researching or working combat zone cases.

(4) The transaction date of TC 500 with Closing Code 52, 54, or 56 is the date the taxpayer entered a CZ, and the transaction date of TC 500 with Closing Code 53, 55, or 57 is the date the taxpayer exited a CZ.

(5) TC 500 CC 58 will be used when a combat zone veteran has been hospitalized due to injuries sustained in a combat zone. Upon input of the TC 500 CC 58 an indicator 3 will systemically update to IMFOLE signifying that the taxpayer is hospitalized. Upon their exit from the hospital a new TC 500 CC 59 will be input, and IMFOLE will systemically update to an indicator 2 (no longer in a combat zone). The TC 500 CC 58 will mirror the existing functionality of the TC 500 CC 52/54/56 by extending the ASED, suspending interest and penalties, and preventing collection, however, it will not prevent the extension of the CSED for the duration of hospitalization. TC 500 CC 59 will mirror the existing functionality of the 53/55/57 and allow for the re-entry into active collection 180 days from posting. See IRM 5.19.10.6.3, Combat Zone Freeze Codes.

(1) Under the Servicemembers Civil Relief Act (Title 50x, Section 4000, United States Code), a taxpayer in the Armed Forces (not in a combat zone) having a liability that was due before entering military service and whose ability to pay has been materially affected by joining the military service, may request to defer payment of the liability; otherwise known as military deferment. If granted, no interest will accrue during the deferral period, which starts from the day the taxpayer reports for active duty up through 180 days after release from military service (initial period of military service).

(2) Collection (Compliance Services Collection Operations) will determine a taxpayer's eligibility for military deferment and input the identifying codes on the affected tax module; TC 500 with closing code 50 or 51 (closing code 51 is valid after 2003).

(3) Members of the armed forces who do not qualify for military deferment may be eligible for a decrease in interest rate. The decrease in interest rate applies to an outstanding tax liability "incurred prior" to entering the military service (Title 50 Appendix, Section 3937, United States Code). The rate of interest charged on tax liabilities incurred prior to entering the military service will be the applicable rate up to a maximum interest rate of 6% and only during the period of initial military service. Manually compute and assess interest during periods where the applicable interest rate exceeds the maximum 6%.

(4) Military deferment cases are maintained by Centralized Case Processing Operations, Field Operations Resource Team (FORT) in Philadelphia. At the end of the deferral period, FORT will compute and assess interest accordingly. For more information on military deferment cases, refer to IRM 5.1.7.13.2, Interest and Limitation on Collection; IRM 5.19.1.5.11, Killed in Terrorist Action (KITA), Killed in Action (KIA), and Astronauts Killed in the Line of Duty, and Pub 3, Armed Forces' Tax Guide.

(1) For disasters declared after 12/31/1997 and before 09/11/2001, where the IRS granted an extension of time to file (IRC 6081) and an extension of time to pay (IRC 6161) for a taxpayer located in a federally declared disaster area, IRC 6404(h) authorized the abatement of interest and penalties during the declared disaster period plus the time covered under the extension to file and the extension to pay.

(2) For disasters declared on or after 09/11/2001, IRC 7508A authorizes the IRS to disregard (exclude) a period of up to one year when determining the interest liability for a taxpayer affected by a federally declared disaster. After each federally declared disaster, the IRS issues guidance detailing the type of relief given, the period of time relief is granted, and details of taxpayers eligible for the disaster relief. Most taxpayers "affected" by a federally declared disaster are systemically identified with a TC 971 and AC 086, 087, or 688. A taxpayer who was not systemically identified will have to self-identify by writing the name of the disaster across the top of his or her tax return that was affected by the disaster. See IRM 25.16.1.3, Identification of Covered Disaster Area, Postponement Period, and Affected Taxpayers.

(3) When adjusting interest on a module where the disaster information was manually input, go to the IRS Assistance Disaster Program website to verify the effective dates of the applicable disaster or the Organizational Support & Continuity of Operations website.

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(1) If any of the interest provisions mentioned throughout this IRM section was overlooked during processing of a qualified return, a taxpayer can file a request to abate interest using Form 843, Claim for Refund and Request for Abatement. While the Form 843 is the preferred form to request an abatement or suspension of interest, IRS will review and consider all signed correspondence requests having the same required elements (for example, name, taxpayer identification number, interest period in question, signature under penalties of perjury, and the reason(s) for the abatement, and so on.) as that of the Form 843.

(2) Taxpayers should submit a completed Form 843 as directed in the instructions to that form, as the filing address depends on a number of circumstances. All Form 843 for interest abatement (for example., computation, IRS error, net rate netting, and so on.) should be identified on IDRS and Master File with a TC 971 and an action code (AC) 660. Accounts Management is responsible for the input of a TC 971 with an AC 660 on to the taxpayer's account, but if the AC 660 information is missing on the assigned interest abatement case, enter the information on to IDRS.

(3) Form 843 requests due to an IRS unreasonable error or delay (IRC 6404(e)(1)) are routed according to established instructions in IRM 21.5.2.4.10.1, Ministerial/Managerial Interest Abatement. A taxpayer might request the abatement of interest due to a ministerial or managerial act during the collection process or during an examination. Secure a completed signed Form 843. The Form 843 must include the following elements:

• Description of the unreasonable error or delay caused by an IRS employee.

• The time frame (from MM-DD-YYYY to MM-DD-YYYY) of the unreasonable error or delay for interest abatement.

• Taxpayer(s) signature.

Note: Work the interest abatement request according to your area's established guidelines. See IRM 5.1.15.16.3, Interest Abatement, or IRM 4.8.8.5.7, Technical Services Interest Abatement Coordinator Procedures, but do not send the request to a campus.

(4) For IRC 6404(e)(1) interest abatement requests where the alleged error or delay was due to an act of an Appeals employee, route the case to the Compliance IAC. If the taxpayer disagrees with the Compliance IACs decision, issue a claim disallowance letter giving the taxpayer their appeal rights. Forward the taxpayer's written protest to Appeals for a hearing. Flag the outside of the case as well as the transmittal that the taxpayer alleges an unreasonable error or delay by an Appeals employee.

(5) The following cases do not qualify for interest abatement:

1. Taxpayers who deducted Qualifying Therapeutic Discovery Project (QTDP) expenses on their 2009 and 2010 returns, and then received a non-taxable grant in 2010 and or 2011 for part or all of the expenses claimed, are not entitled to an underpayment interest suspension period when they are required to amend their 2009 and 2010 tax returns to reduce the expenses deducted. Neither section 9023 of the Affordable Care Act (ACA) nor Notice 2010-45, Qualifying Therapeutic Discovery Project Credit, allows for a restriction or abatement of the underpayment interest. To the extent the reduced expense deduction creates an underpayment in 2009 or 2010, or a deficiency if an amended return is not filed, underpayment interest will be charged under IRC 6601. Interest accrues from when the tax was due (generally, the due date for filing the original 2009 or 2010 return, without regard to extensions). Careful consideration must be given prior to causing a situation where the ability of IRS computer systems to calculate interest is circumscribed. Systemic calculation of interest for any tax module is overridden only when IRS computer systems are incapable of calculating the interest on their own. Any request to suspend or abate underpayment interest should be denied, citing the information above.

2. Voluntary Disclosure Practice (VDP) cases are provided for in Form 906, Specific Matters Closing Agreements. The template language for VDP Forms 906 includes the following language concerning interest: "Interest is due as provided by law on taxpayer’s underpayments of tax and penalties as determined under this agreement for tax years [period covered by the voluntary disclosure] and the suspension of interest provisions of IRC 6404(g) do not apply."

   Note: Abatements should not be considered in any cases with a Form 906 countersigned by a representative of the IRS. Fully executed Forms 906 are final.

   Note: Previously known as the Offshore Voluntary Disclosure Program (OVDP) prior to September 28, 2018. See IRM 4.63.3.26, Voluntary Disclosure Practice (Post OVDP).

(1) Taxpayers have the right to appeal the denial of an interest abatement request (regardless of account status). Taxpayers who wish to appeal the disallowance of their interest abatement request must send their protest (a brief statement detailing the reason(s) the IRS should reconsider the interest abatement request) to the office that issued the interest abatement disallowance letter. That office will forward the taxpayer's protest to Appeals. For more information on the appeal process, see IRM 8.7.7, Claim and Overassessment Cases.

(2) IRC 6404(g) is an interest suspension provision, not an interest abatement. There is no appeal right pertaining to interest suspension under IRC 6404(g), nor is it eligible for judicial review in Tax Court.

(1) The Office of Servicewide Interest in the Small Business/Self-Employed Division has responsibility for all interest; accrued, abated, assessed, offset, refunded or suspended systemically and manually. Report suspected systemic interest discrepancies to the User Support Unit in your respective campus. Disputes within the IRS over manual interest calculations should be settled according to the area or function's established guidelines. For discrepancies concerning the accuracy of the computed interest amount, contact the area that performed the interest computation for resolution. For interest discrepancies due to interpretation or application of interest law(s) which cannot be resolved locally, forward a description of the problem along with the supporting interest computation and case file documentation to the analyst with program responsibilities as listed on the Servicewide Interest Virtual Library.