Internal Revenue Manual Part 20:
Penalty & Interest
Every penalty the IRS can charge. Every interest calculation. And — the part they really don't want you to know — every abatement and waiver they're required to grant. Our Licensed Enrolled Agents use IRM Part 20 to get penalties eliminated for our clients every single week.
Last Verified:
The Detangler™ — What IRM Part 20 Actually Means
Here's what they're doing to you: The IRS added a failure-to-file penalty, a failure-to-pay penalty, AND interest on top of your original balance — and then charged interest on those penalties too. It compounds daily. The bill you got 2 years ago for $20,000? It's probably $31,000 now. But here's the thing:a huge percentage of those penalties can be abated — eliminated — if you know how to ask. The First-Time Abatement program alone removes penalties for millions of taxpayers every year. The IRS does not advertise this. We do.
Key Penalty Reference: IRC Sections
Assessed when a return is filed late. Runs from the original due date.
Assessed on unpaid tax from the due date. Reduces to 0.25% during active installment agreement.
Assessed when a taxpayer fails to pay adequate estimated taxes throughout the year.
Assessed for negligence, disregard of rules, or substantial understatement of income tax.
The Secrets They Won't Tell You: Penalty Abatement
These are your legal rights. Most IRS agents won't bring them up. Our Enrolled Agents will.
First-Time Abatement (FTA)
Available if you have no penalties in the prior 3 years. The IRS won't advertise this. Our Enrolled Agents request it routinely.
Reasonable Cause
Medical emergency, natural disaster, death in family, or reliance on incorrect professional advice can eliminate penalties.
Statutory Exception
Specific situations where penalties don't apply by law — erroneous IRS written advice, or disaster area relief.
Administrative Waiver
IRS can waive penalties under specific programs. Rev. Proc. 84-35 for small partnerships is one example.
Table of Contents — IRM Part 20
Penalty Handbook
Interest
Failure to Deposit Penalty
International Penalties
Owe $10,000+? Stop the Hose-ing.
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→ IRM Part 5: Collecting Process
Liens, levies, seizures — the full enforcement playbook.
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