The IRS lost about a quarter of its workforce. The penalties did not.

The IRS lost about a quarter of its workforce over the past year, and the units that run audits and enforcement absorbed the steepest cuts, while the staff who answer calls and process correspondence were reduced and only partly backfilled. The practical result is that routine matters that once took weeks now sit for months. Penalties and interest do not pause while your file waits, so the burden has shifted onto you to push your matter forward and protect your own deadlines.

The two main routes are first-time abatement, for taxpayers with a clean recent compliance history, and reasonable cause relief, where circumstances outside your control caused the failure. You request abatement in writing or by phone, supported by facts and documentation. When a penalty is reduced or removed, the statutory interest may also be reduced or removed as long as it is related to that penalty. Interest on the underlying unpaid tax, however, is different and normally continues until paid. First-time abatement is an administrative waiver limited to the failure-to-file, failure-to-pay, and failure-to-deposit penalties. It is not available for accuracy-related, estimated-tax, or fraud penalties. It generally requires that you have filed the same type of return, if required, for the prior three tax years, have filed or extended all current returns and paid or arranged to pay any tax due, and had no disqualifying penalties during that three-year compliance period.

An Offer in Compromise lets you settle a federal tax debt for less than the full amount when you cannot pay in full and the IRS agrees the offered amount reflects your reasonable collection potential. There are threshold rules first: you must be current on required filings and on estimated payments or federal tax deposits, and a taxpayer in an open bankruptcy generally cannot submit one. If those are met, eligibility turns on your income, expenses, assets, and future earning capacity, not on a hardship narrative alone. Many people who ask about an offer are better suited to another collection alternative, so the financial analysis has to be right before you file. An offer is submitted on the Form 656 booklet with Form 433-A (OIC) and/or Form 433-B (OIC), or online where the IRS allows it, with a $205 application fee unless you qualify for the low-income waiver, which can also waive the initial payments. One caution that is easy to miss: filing an offer suspends the 10-year collection clock while the IRS reviews it, so a rejected offer can leave the agency more time to collect than it had before you filed.

Yes, through a levy, but generally only after it has sent notice and given you the chance to respond. Before most levies the IRS must issue a Final Notice of Intent to Levy and inform you of your right to a Collection Due Process hearing, which you can request within a limited window. Acting inside that window is often the difference between stopping a levy and reacting after the funds are gone. The request window is generally 30 days from the date printed on the face of an LT11 or Letter 1058, not the date you get around to opening the envelope. Missing that window can drop you to an equivalent hearing and cost your right to Tax Court review, so act fast.

Yes, and the New York standard is harsher than the federal one. Unlike the federal trust fund penalty, which requires a showing of willfulness, New York imposes personal liability on a responsible person for sales tax the business collected and failed to remit without any willfulness requirement, under NY Tax Law §§ 1131(1) and 1133(a). Owners, officers, and others under a duty to collect and remit can be reached individually, and corporate title alone can create exposure. Certain minority LLC members and limited partners may qualify for partial relief, but the exposure is serious and fact-specific.

Source: NY Tax Law §§ 1131(1), 1133(a)