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: How to Challenge IRS Penalties (Abatement and Appeals)
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: FTB Penalty Relief – How to Request a Waiver or Abatement in California
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:
- Set up an Installment Agreement
- Submit an Offer in Compromise
- Qualify for Currently Not Collectible
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.
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
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 offer interest relief?
In most cases, no. The IRS only removes interest if it was caused by an IRS delay or error. General financial hardship or late payment is not considered a valid reason for interest abatement.
Can the FTB waive interest on California tax debt?
Rarely. Like the IRS, the FTB generally does not waive interest unless the delay was due to an unreasonable error or processing issue on their part. However, penalties may still be reduced even if interest is not.
What’s the difference between penalty and interest relief?
Penalty relief is more common and can be granted for reasonable cause, first-time compliance, or hardship. Interest relief is limited to cases of government-caused delays or incorrect assessments.
Can I request both penalty and interest relief at once?
Yes. You can submit a request that addresses both penalties and interest. The IRS and FTB will evaluate each separately. A CPA can improve your chances by structuring the request strategically.
Should I hire a CPA to request interest abatement?
Absolutely. A CPA can identify if your case qualifies, cite the correct legal standards, and submit documentation that supports your claim. Most self-filed requests for interest relief are denied due to technical errors.
📣 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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