Interest Relief – Can the IRS or FTB Reduce What You Owe?
Interest Is the Silent Killer of Tax Debt
When taxpayers fall behind on their IRS or FTB obligations, it’s not just the penalties that build up—it’s the interest. Unlike penalties, which can sometimes be removed more easily, interest relief is rare, highly restricted, and misunderstood.
If you're carrying a growing tax balance, it’s critical to understand how interest works, when it can be reduced, and how to build a strategy that minimizes it going forward.
Can the IRS Remove or Reduce Interest?
Usually no—unless the interest is connected to an abated penalty or a specific IRS processing error.
Here’s what the IRS will consider:
- Interest on abated penalties: If a penalty is removed, the related interest on that penalty may also be wiped out.
- Interest due to IRS delay or error: Under IRC §6404(e), interest can sometimes be reduced if the IRS made a clear error or unreasonable delay in processing.
But in general, interest on the base tax amount will remain until the debt is fully paid or discharged.
Related: Strategies for challenging IRS penalties
What About California’s FTB?
The Franchise Tax Board (FTB) follows similar rules—but with even less flexibility.
The FTB will only reduce interest in cases involving:
- FTB operational errors
- Disaster declarations
- Amended returns that impact prior interest computations
FTB interest is statutory—meaning they are required by law to charge it unless a specific relief mechanism is triggered.
Related: California FTB penalty relief options explained
So What Can You Actually Do?
1. Remove the Source – Penalties
If your interest stems from a penalty, requesting abatement of that penalty is your best shot.
See: Why the IRS Rejected Your Offer in Compromise
2. Stop It from Growing
File all back returns, request a resolution, and stop the accrual:
- Setting up an Installment Agreement
- Resolving debt with an Offer in Compromise
- Pausing collections with Currently Not Collectible status
These won’t eliminate existing interest, but they stop future growth.
What If Interest Makes the Debt Unpayable?
If interest has made your IRS or FTB balance unmanageable, your next step is to negotiate the total amount down—interest included—through an Offer in Compromise or partial pay agreement.
You may also be in this situation after responding to an IRS audit assessment, where additional balances and interest were added.
Also, remember that both the IRS and FTB stop charging interest once the collection statute expires. In some cases, it may make sense to let the clock run.
Related: The IRS 10-Year Collection Statute – CSED Rules Explained
When Interest Relief Is Worth Pursuing
It’s worth submitting an interest relief request if:
- You received a penalty in error and had it abated
- The IRS or FTB significantly delayed processing your documents
- You were impacted by a natural disaster and filed for relief under federal or state declarations
- You’re appealing a denial with a valid hardship or administrative error
We Help Orange County Taxpayers Navigate Interest Relief
At Boulanger CPA and Consulting PC, we help taxpayers:
- Understand the structure of their growing tax balances
- Eliminate penalties and stop future interest accrual
- Request interest relief where it’s allowed
- Build resolution strategies that reduce total owed
- Provide Orange County IRS tax relief options that fit your situation
For deeper strategies on penalty and interest relief, be sure to learn more in Defend What’s Yours—a practical guide designed to protect taxpayers from unnecessary costs.
Call
(657) 218-5700 or request a strategy call at
www.orangecounty.cpa
Local service, aggressive representation, and proven results.
Frequently Asked Questions
Does the IRS ever remove interest on tax debt?
Generally, no. The IRS does not remove interest unless it resulted from an unreasonable IRS delay in processing or an official error. Interest accrues automatically on unpaid balances.
Can the California FTB reduce interest charges?
Like the IRS, the FTB rarely removes interest. Relief is possible if the delay in billing or collection was due to an FTB error or unreasonable delay.
Is penalty relief the same as interest relief?
No. Penalty relief is much more common and can significantly lower what you owe, but interest almost always continues unless tied to an agency error.
Can I reduce interest by negotiating with the IRS or FTB?
Not directly. However, you can limit future interest accrual by resolving your tax debt quickly through an installment agreement, Offer in Compromise, or Currently Not Collectible status.
Does interest stop during an appeal?
No. Interest continues to accrue during audits, appeals, and even litigation, unless you pay the balance in full or post a bond in Tax Court.
Can interest be reduced if penalties are abated?
Yes. If penalties are removed, the interest associated with those penalties will also be eliminated. However, interest tied to the underlying tax remains.
Is there a way to avoid interest altogether?
The best way to avoid interest is to pay taxes in full and on time. Once interest starts, it is extremely difficult to remove unless caused by government error.
Should I get professional help for interest relief?
Yes. A professional can review your case for agency error claims and focus on penalty relief, debt resolution, and compliance strategies to minimize total cost.
📣 About the Author
Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.
He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.
With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.
Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.
Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.
📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.
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