How to resolve IRS penalty interest abatement issue when approved but not refunded?

This is actually a common issue with abatements. What likely happened is that the IRS approved your abatement but instead of refunding you directly, they applied it as a credit to your account. The 1099-INT was generated automatically because technically they "paid" you interest on the abated amount. You need to call the IRS and request a transcript of your account for that tax year. This will show exactly what happened to the abated amount. If it shows as a credit but you never received it, you should request that they issue a refund check for the credit balance. For the 1099-INT issue, you do have to report it on your taxes as income, but you can also claim the amount you never received as a "loss" using Form 8275 (Disclosure Statement) to explain the situation. This should zero out the tax impact.

After struggling with a similar situation last year, I found this amazing AI tool that helped me sort through all my tax documents and correspondence with the IRS. It's called taxr.ai (https://taxr.ai) and it can actually read all your IRS notices and transcripts to tell you exactly what's happening with your account. I uploaded my abatement approval letter and my account transcript, and it highlighted that my abatement was approved but applied as a credit to a different tax year! The tool explained what every code on my transcript meant and gave me step-by-step instructions for resolving the issue. It even helped me draft a letter to the IRS explaining the situation. Seriously saved me hours of research and confusion.

Just wanted to update everyone - I tried that taxr.ai tool mentioned above after struggling with my own abatement issue. My situation was slightly different (penalty for late filing that wasn't my fault), but I was also getting nowhere with the IRS. The tool actually identified that my abatement had been approved but was sitting as a credit on my account! It explained all the transaction codes on my transcript and showed me exactly where the credit was applied. I called the IRS using the specific instructions it provided, referenced the correct internal codes, and the representative immediately knew what I was talking about. I received my refund check last week! Plus, it helped me understand how to properly report the 1099-INT on my taxes without paying extra. Definitely worth checking out if you're dealing with IRS issues.

If you've been trying to call the IRS without success, you might want to try Claimyr (https://claimyr.com). I was in a similar situation with an abatement issue and couldn't get through on the IRS phone lines for weeks. Claimyr helped me skip the wait and got me connected to an IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent was able to look up my account while I was on the phone and told me exactly what happened to my abatement. Turns out they had applied it to a different tax year where I didn't owe anything, so it was just sitting there as an unused credit! The agent was able to process a refund request for me right over the phone.

I wanted to follow up about my experience with Claimyr that I was skeptical about. After struggling to get through to the IRS for over a month regarding my abatement issue, I decided to give it a try despite my concerns. I was honestly shocked when I got a call back in about 20 minutes connecting me to an actual IRS representative. The agent was able to pull up my account immediately and confirmed that my abatement amount was sitting as a credit. She explained that because I didn't specifically request a refund after the abatement was approved, the system just held onto it. The agent processed my refund request right there on the phone, and I received a check about 3 weeks later. Sorry for doubting this service - it genuinely saved me weeks of frustration. For anyone dealing with the IRS right now, it's definitely worth considering.

A quick tip from someone who used to work with tax issues - when you receive an abatement approval, you need to specifically request a refund if you've already paid the penalty amount. The IRS doesn't automatically issue refunds for abatements; they just credit your account. You should call the IRS (painful, I know) and ask for: 1. An account transcript for the tax year in question 2. Verification of the abatement approval 3. Request that they issue a refund for the credit balance As for the 1099-INT, yes, you legally need to report it. However, since you haven't actually received the money, you can offset it by claiming a loss. Make sure to document everything thoroughly in case of an audit.

Has anyone successfully gotten the IRS to revoke a 1099-INT in a situation like this? It seems ridiculous that they make you report income you never received and then jump through hoops to claim it back on your tax return.