How do I resolve a penalty interest abatement issue with the IRS?

Thanks for the explanation! I've tried calling that number multiple times but can't get through to an actual person. Is there any specific department I should ask for when I call? And should I just keep reporting this interest income on my taxes even though I never received the money?

When calling the IRS, select the option for "tax account" questions rather than filing or payment options. The best times to call are early in the morning when they first open or late in the day on Thursdays and Fridays when call volume tends to be lower. Yes, you need to report the 1099-INT on your taxes because the IRS has already reported it to them in their systems. If you don't report it, you'll likely receive a CP2000 notice for underreported income. Once you get this resolved and receive your refund, it won't result in double taxation since you've already paid tax on it appropriately.

Does this taxr.ai thing actually work with penalty abatement cases? I'm dealing with something similar but mine involves estimated tax penalties from my self-employment income. Would it handle that too or just regular penalties?

I'm a bit skeptical about these AI tax services. How do they access your IRS account info? Do you have to give them all your personal data? Seems risky to share tax documents with some random website.

It works great with all types of penalty cases including estimated tax penalties. You just upload your IRS notices and it identifies the specific penalty type and applicable abatement rules. I used it for a failure-to-pay penalty but my brother used it for estimated tax penalties from his consulting business. Regarding security concerns, you only upload the specific documents you want analyzed - you don't connect it to your IRS account. They use the same encryption as banks, and you can even blur out your SSN and other sensitive info before uploading. The AI just needs to see the penalty codes and amounts to give you the right guidance.

How exactly does this service work? Do they just keep calling until they get through? I've been on hold with the IRS for literally 3+ hours before they disconnected me.

This sounds like a scam. How would some third-party service get you through to the IRS faster than just calling yourself? The IRS phone system puts everyone in the same queue. Seems like they're just charging for something you can do yourself if you're patient enough.

They use an automated system that continuously redials and navigates the IRS phone tree until they reach a human. Once they have an agent on the line, they connect that call to your phone. It's basically like having someone sit there and keep redialing for you, which most of us don't have time to do. No, it's definitely not a scam. The IRS phone system has different queues based on which options you select, and certain paths get answered faster than others. They've mapped out all the most efficient paths through the system for different departments. I was skeptical too but was desperate after trying for weeks. I got connected in about 20 minutes when I'd previously wasted hours getting nowhere.

Thanks, I didn't know about Form 843! Would this be in addition to calling them, or should I try this first? And do I need to include any specific language referring to the interest that was reported on the 1099-INT?

I would try calling first using one of the methods others suggested since that might be faster. Form 843 can take 8-12 weeks to process, sometimes longer with current IRS backlogs. On the form, specifically reference that you received a 1099-INT for interest that was never paid to you. Include the exact amount and date of the abatement approval. In Section 7 (Explanation), write something like: "I received a 1099-INT for tax year 2021 showing interest of $982.34 from an approved penalty abatement. I have not received this refund by check or direct deposit, yet I am required to pay income tax on this amount. I am requesting the IRS to issue the refund for the approved abatement amount.

Is that right? I thought you couldn't file an amended return just because you made a mistake or reported something correctly based on the documents you had at the time. The 1099-INT was technically correct from the IRS perspective.

You're absolutely right to question this. You can't amend just because you don't like reporting the income - the 1099-INT was correctly issued. However, if Mohamed never receives the actual refund after exhausting all options with the IRS, there might be grounds for an amended return based on the principle that you shouldn't pay tax on income you never actually received. But this would be a complex situation that might require professional tax advice. The better approach is definitely to get the IRS to release the stuck refund first using the methods others have suggested.