It may have to be argued in IRS tax court (yes, they have their own courts), but if you are represented by a good tax attorney it may be shown that circumstances beyond your control kept you from paying in a timely fashion, which led to income tax delinquency.
Penalties can easily make up to 25% of the total amount owed, but could reach much higher depending on the type of penalty. IRS tax penalty abatement does happen. It has happened for our clients.
Before applying for any abatement of penalty you should have proper representation because there are key points that must be demonstrated in a proper manner in order to satisfy requirements on any abatement of penalty.
The IRS also penalizes taxpayers for inaccurately reporting their income and for committing tax fraud. The amount of penalty depends on the reason for, and the amount of, tax underpayment. Penalties for tax fraud are usually the highest amounts allowed by law. Penalties keep accruing the longer the taxes go unpaid. In some cases, the amount of the combined penalties exceeds the tax itself. IRS tax penalty abatement is often the only way out.
Your IRS tax lawyer must be able to convince either the IRS or a court that the assessment of the tax or of the penalty was unfounded. Your Attorney must present the government with specific reasons as to why an abatement of penalty is warranted. The best results are achieved when your Tax Attorney can point to a specific provision in the tax code or to similar facts in case law where a Court has found that assessed taxes or penalties should be reduced or eliminated.