Tabaka v. Commissioner: IRS Interest Abatement Denied Despite Taxpayer Claims of Delay

The $1,649 Question: Can Taxpayers Escape IRS Interest Charges?

The Tax Court’s ruling in Tabaka v. Commissioner, T.C. Memo. 2026-70, delivered a clear message to taxpayers seeking abatement of IRS interest charges: the bar for relief is extraordinarily high. The court denied Andrew Tabaka’s request to abate $1,649 in interest stemming from a 2016 tax deficiency, reaffirming the IRS’s broad discretion under Section 6404(h) to review and deny such claims. The stakes were modest—$1,649—but the legal principles at issue carry sweeping implications for how the Tax Court exercises its authority over IRS interest assessments.

Section 6404(h) grants the Tax Court jurisdiction to review the IRS’s refusal to abate interest, but only after the agency issues a final determination denying the claim. The statute empowers the court to act as a check on IRS discretion, yet it simultaneously underscores the court’s limited role: it cannot second-guess the IRS’s decisions unless they constitute an abuse of discretion. In Tabaka, the court held that the IRS’s denial of the taxpayer’s interest abatement request was not an abuse of discretion, reinforcing the IRS’s near-total control over interest assessments. The decision arrives at a time when taxpayers increasingly challenge IRS delays and errors, making the court’s interpretation of § 6404(h) a critical precedent for future abatement claims.

The stakes extend beyond Tabaka’s $1,649. The case tests the boundaries of the Tax Court’s authority to scrutinize IRS interest calculations—a power the court has wielded sparingly. By upholding the IRS’s refusal to abate interest, the Tax Court signals that taxpayers face an uphill battle in challenging interest assessments, even when delays or errors occur. The ruling also highlights the court’s role as a gatekeeper, ensuring that taxpayers cannot bypass IRS procedures by petitioning the court prematurely. For practitioners, the case serves as a cautionary tale: interest abatement remains a narrow exception, not a routine remedy.

A Two-Year Tax Saga: How a Simple Retirement Income Dispute Escalated

The dispute began with a routine tax return, but a series of IRS communications and procedural missteps transformed a straightforward retirement income issue into a two-year odyssey of notices, appeals, and ultimately a fight over $1,649 in interest. The case traces the arc of a typical tax dispute—examination, deficiency notice, Tax Court petition, Appeals involvement, and a stipulated settlement—only to culminate in a claim for interest abatement that the IRS rejected.

On March 15, 2017, petitioner Andrew Tabaka filed his 2016 joint Federal income tax return with his wife, Henrietta, reporting no tax due. The return included retirement income, but the IRS later alleged that two Forms 1099-R—distributions totaling $93,200 from third-party payors—had been omitted. The IRS’s examination began shortly thereafter, setting the stage for a dispute that would span nearly three years.

On April 16, 2018, the IRS issued a CP2000 letter proposing a deficiency of $23,960 and an accuracy-related penalty of $4,792 for tax year 2016. The deficiency stemmed from the unreported retirement income, as documented by the Forms 1099-R. The CP2000 letter marked the IRS’s first written contact with the taxpayers regarding the deficiency, triggering the statutory clock for potential interest abatement claims under Section 6404(e)(1). The taxpayers did not respond adequately to the CP2000, prompting the IRS to escalate the matter.

On July 9, 2018—less than three months after the CP2000—the IRS issued a Notice of Deficiency determining the same deficiency and penalty amounts. The taxpayers timely petitioned the U.S. Tax Court on October 10, 2018, docketing the case as Tabaka v. Commissioner, No. 19916-18. That same day, they made a voluntary payment of $10,590 toward their 2016 tax liability, a move that would later complicate their interest abatement claim.

The case then entered the IRS Independent Office of Appeals (Appeals) for potential settlement. In December 2018, Appeals notified the taxpayers that their case had been assigned to an Appeals officer and scheduled a conference call for January 2019. The officer explicitly warned that “interest continues to accrue while your case is open in Appeals,” emphasizing the IRS’s statutory mandate to charge interest from the return due date until payment in full under Sections 6601(a) and 6622(a). By April 2019, Appeals had been unable to reach an agreement with the taxpayers and referred the case back to IRS counsel for trial preparation.

The procedural wheels of justice turned swiftly after the referral. On June 5, 2019, the Tax Court scheduled a trial for October 28, 2019. On July 3, 2019—just one month later—the taxpayers made an additional payment of $7,848, bringing their total payments for 2016 to $18,438. The parties then executed a Stipulated Decision on August 6, 2019, agreeing that there was a deficiency of $18,438 for 2016, no accuracy-related penalty would be imposed, and “interest will be assessed as provided by law on the deficiency.” The court entered the decision the same day.

The Stipulated Decision resolved the underlying tax liability, but the IRS’s administrative machinery continued to churn. On November 18, 2019, the IRS mailed the taxpayers a letter calculating interest owed of $2,246 for 2016. The calculation failed to account for the $18,438 in payments the taxpayers had made in 2018 and 2019. The IRS promptly abated $614 of the interest upon recognizing the error, leaving a net interest liability of $1,649. The taxpayers paid this amount in December 2019.

Nearly a year later, on June 5, 2020, the taxpayers filed Form 843, the official claim form for refunds and interest abatement requests under Section 6404(e). They checked the box alleging that interest was assessed “as a result of IRS errors or delays” and attached a letter arguing that abatement was justified due to “multiple significant delays and errors by [the] IRS” during a “two-year and seven-month period from April 15, 2017, to November 18, 2019.” The taxpayers characterized the case as “a straightforward matter” that had been “unreasonably and unnecessarily prolonged for an inordinate amount of time.”

The IRS’s response was swift but unyielding. On April 30, 2021, the IRS Service Center in Holtsville, New York, sent a letter stating, “We can’t process your claim for the tax periods listed above.” The taxpayers followed up with another letter on June 6, 2024, to which the IRS replied on July 9, 2024: “We’re required to charge interest on the unpaid tax from the due date of the return to the date you pay the tax in full.” The letter noted that the IRS had already abated $614 of interest and informed the taxpayers that they were required to pay the remaining balance. Crucially, the IRS did not issue a formal denial of the claim by sending a Final Determination, leaving the taxpayers in procedural limbo.

On October 19, 2024—more than four years after the original CP2000 letter—the taxpayers filed a petition with the Tax Court, seeking a refund of the $1,649 in interest. The case, now docketed as Tabaka v. Commissioner, No. 16687-24, presented a narrow but consequential question: whether the IRS’s handling of the underlying tax dispute justified abatement of the interest that accrued during the two-year saga. The Tax Court’s analysis would hinge on whether the IRS’s actions—or inactions—constituted an “unreasonable error or delay” under Section 6404(e)(1), a provision that grants the IRS discretion to abate interest in limited circumstances.

Clash of Arguments: Did the IRS Unreasonably Delay?

Petitioner Andrew Tabaka’s argument hinged on a single, sweeping contention: the IRS’s handling of his 2016 tax matter was marred by “multiple significant delays and errors” that stretched over a “two-year and seven-month period,” transforming what he described as a “straightforward matter” into an unnecessarily prolonged ordeal. His June 5, 2020, Form 843 claim for refund and request for abatement zeroed in on the IRS’s alleged missteps, which he argued directly caused the accrual of $1,649 in interest. Tabaka’s letter to the IRS painted a picture of systemic dysfunction, citing delays in processing, errors in interest calculations, and procedural missteps that he claimed violated the spirit of fairness embedded in Section 6404(e)(1). The crux of his argument was that the IRS’s actions—or inactions—rose to the level of an “unreasonable error or delay,” a threshold he believed clearly met given the protracted timeline from the initial examination to the final resolution.

The IRS, in contrast, mounted a defense rooted in procedural rigor and statutory compliance. In its July 9, 2024, response to Tabaka’s abatement claim, the agency flatly rejected the notion of any “unreasonable error or delay,” asserting that its actions were entirely consistent with the law. The IRS emphasized that interest accrues automatically under Sections 6601(a) and 6621(a)(2) from the due date of the return until payment is made in full, and that no provision of the Code or regulations grants it discretion to waive interest based on perceived inefficiencies in case resolution. The agency further argued that any delays in Tabaka’s case were not attributable to “ministerial or managerial acts” as defined in Treasury Regulation § 301.6404-2(b), but rather reflected the ordinary course of tax administration, including the necessary steps to verify the accuracy of third-party-reported retirement income.

The IRS’s position rested on a narrow interpretation of Section 6404(e)(1), which permits abatement of interest only where an “unreasonable error or delay” occurs in the performance of a ministerial or managerial act. The agency contended that Tabaka’s case involved no such errors or delays, pointing to the timeline of events as evidence of expeditious handling. From the issuance of the April 16, 2018, Letter CP2000 to the August 6, 2019, entry of the Stipulated Decision, the IRS argued that fewer than 16 months had elapsed—a period it characterized as “quite expeditious” compared to the “mine run of cases” in the Tax Court. The IRS also stressed that the delay, if any, was not the result of a ministerial or managerial act, as the core issue—verifying the taxability of $93,200 in retirement income reported on Forms 1099-R—required the exercise of judgment in determining the correct tax liability. Under Treasury Regulation § 301.6404-2(b), such legal determinations fall outside the scope of abatable errors or delays, as they involve discretionary decision-making rather than clerical or procedural functions.

The clash between Tabaka’s narrative of systemic IRS failure and the agency’s defense of procedural correctness set the stage for a legal showdown over the boundaries of the Tax Court’s authority to second-guess the IRS’s handling of interest accruals. The stakes were clear: if the court sided with Tabaka, it would signal a willingness to scrutinize the IRS’s administrative efficiency more closely, potentially expanding the scope of interest abatement beyond its traditionally narrow confines. Conversely, a ruling in favor of the IRS would reaffirm the agency’s broad discretion under Section 6404(e)(1), reinforcing the high bar taxpayers must clear to challenge interest assessments. The arguments, now laid bare, awaited the court’s resolution—a decision that would hinge on whether the IRS’s actions, or lack thereof, crossed the line from ordinary administrative delay to legally cognizable error.

The Court's Verdict: No Abuse of Discretion by the IRS

The Tax Court, in a memorandum opinion issued on July 3, 2025, in Petitioner v. Commissioner, T.C. Memo. 2025-101, delivered a decisive blow to the taxpayer’s attempt to abate $1,649 in interest accrued on a 2016 tax deficiency. The court’s ruling hinged on two critical legal standards under Section 6404(e)(1), which permits interest abatement only for "unreasonable error or delay" by the IRS in performing a ministerial or managerial act. The court found no such error or delay, affirming the IRS’s broad discretion and reinforcing the high bar taxpayers must clear to challenge interest assessments.

No "Unreasonable Error or Delay" by the IRS

The court first addressed whether the IRS committed an "unreasonable error or delay" under Section 6404(e)(1), which states:

"The Secretary may abate the assessment of all or any part of any interest imposed by this title with respect to any period if— (1) such interest is attributable to any unreasonable error or delay by an officer or employee of the Internal Revenue Service (acting in his official capacity) in performing a ministerial or managerial act."

The court emphasized that the statute requires the IRS’s error or delay to be unreasonable and to occur after the taxpayer has been contacted in writing regarding the deficiency. Citing Lee v. Commissioner, 113 T.C. 145, 148–49 (1999), the court reiterated that an error or delay is cognizable only if it cannot be attributed to the taxpayer and occurs post-contact.

In this case, the IRS first contacted the taxpayer in writing on April 16, 2018, regarding the 2016 deficiency. The taxpayer failed to respond adequately, prompting the IRS to issue a Notice of Deficiency on July 9, 2018—just three months later. The taxpayer then petitioned the Tax Court in Docket No. 19916-18 on October 10, 2018, within 93 days of receiving the notice. The case was referred to IRS Appeals for settlement consideration, a standard procedural step outlined in Revenue Procedure 2016-22, § 3.01. Appeals notified the taxpayer in December 2018 and scheduled a hearing for January 2019. Unable to reach an agreement, Appeals returned the case to IRS counsel in April 2019, three months later.

The taxpayer argued that the IRS "unnecessarily and unreasonably referred the matter to Area Counsel to prepare for trial," but the court rejected this contention. The court held that once a case is docketed in the Tax Court and Appeals is unable to resolve it, the IRS has no alternative but to return the case to counsel for trial preparation. The court noted that the parties quickly reached a settlement—a reduced deficiency of $18,438 and no penalty—after the case was returned to IRS counsel, demonstrating that the IRS acted promptly once the dispute was resolved.

The court concluded that the IRS’s actions did not constitute an "unreasonable error or delay." The IRS’s initial contact, issuance of the Notice of Deficiency, and referral to Appeals all occurred within standard timeframes. The taxpayer’s failure to respond adequately to the IRS’s initial inquiry further undermined any claim of unreasonable delay. As the court stated, "Petitioner errs in asserting that the IRS delayed by ‘unnecessarily and unreasonably referring the matter to Area Counsel to prepare for trial.’" The IRS’s actions were procedural and consistent with its administrative obligations.

No Delay in Performing a "Ministerial or Managerial Act"

The court next examined whether the IRS’s actions involved a ministerial or managerial act, as defined by Treasury Regulation § 301.6404-2(b). The regulation distinguishes between the two types of acts:

"A ministerial act means a procedural or mechanical act that does not involve the exercise of judgment or discretion, and that occurs during the processing of a taxpayer’s case after all prerequisites to the act, such as conferences and review by supervisors, have taken place."

"A managerial act means an administrative act that occurs during the processing of a taxpayer’s case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel."

A decision concerning the proper application of Federal tax law is neither a managerial nor a ministerial act.

In this case, the IRS’s actions—issuing a Notice of Deficiency, referring the case to Appeals, and returning it to counsel for trial preparation—were managerial acts involving the exercise of judgment and discretion. The court noted that Appeals’ decision to return the case to counsel was not a clerical error but a deliberate administrative choice made after failed settlement negotiations. The court cited Woodral v. Commissioner, T.C. Memo. 2004-69, 87 T.C.M. (CCH) 1103, 1105, for the principle that taxpayers may only raise arguments they brought to the IRS’s attention during the abatement claim process. Here, the taxpayer did not allege any specific ministerial error, such as a lost payment or processing delay, but instead challenged the IRS’s managerial decisions.

The court emphasized that Section 6404(e)(1) does not authorize abatement for managerial acts, which inherently involve discretion. The IRS’s decision to pursue litigation after Appeals failed to resolve the case was a managerial act, and the court refused to second-guess it. The regulation explicitly states that "a decision concerning the proper application of Federal tax law is neither a managerial nor a ministerial act," and the IRS’s actions fell squarely within this exclusion.

The Court’s Holding

The court’s reasoning culminated in a clear and concise holding:

"For two reasons, we conclude that the IRS did not abuse its discretion in declining to abate interest. First, there was no ‘unreasonable error or delay’ by the IRS. Second, the IRS’s actions did not involve a ‘ministerial or managerial act’ under Section 6404(e)(1)."

The court’s analysis reinforced the high bar for interest abatement, particularly in cases involving managerial acts. The IRS’s discretion under Section 6404(e)(1) remains broad, and taxpayers bear a heavy burden to demonstrate that the IRS’s actions were not only erroneous but also unreasonable and ministerial in nature. The court’s ruling reaffirms that interest abatement is not a remedy for dissatisfaction with the IRS’s administrative processes but a narrow exception for egregious, clerical failures.

What This Means for Taxpayers: Interest Abatement Remains a High Bar

The Tax Court’s decision in Tabaka v. Commissioner, T.C. Memo. 2026-70, reaffirms that interest abatement under Section 6404(e)(1) is a narrow exception, not a remedy for dissatisfaction with the IRS’s administrative pace. The court’s ruling underscores that the IRS’s discretion under § 6404(e)(1)—which permits abatement only for "unreasonable error or delay" in performing a ministerial or managerial act—remains broad and taxpayers bear a heavy burden to meet its exacting standards. The case is non-precedential, but it reflects the Tax Court’s consistent approach to interest abatement claims, emphasizing that time alone does not justify relief.

The court’s holding hinged on the distinction between ministerial acts (routine, clerical functions) and managerial acts (discretionary decisions), a framework codified in Treas. Reg. § 301.6404-2(b). The IRS’s delay in processing the taxpayer’s case did not qualify because it involved judgment calls—such as determining the correct tax liability and negotiating a settlement—rather than clerical failures. As the court noted, "a decision concerning the proper application of Federal tax law is neither a managerial nor a ministerial act." This principle is critical for future taxpayers: abatement is not available for delays inherent in the IRS’s substantive review of tax liabilities, even if those delays feel protracted.

The decision also clarifies the jurisdictional hurdles under § 6404(h), which requires the IRS to issue a final determination before the Tax Court can review an abatement denial. In Tabaka, the IRS never formally denied the claim, but the court treated its inaction as effectively a denial, allowing the taxpayer to petition. This underscores that taxpayers must wait 180 days after filing a claim (Form 843) before seeking judicial review, and the IRS’s silence does not equate to approval. The court’s jurisdiction is limited to reviewing whether the IRS abused its discretion—a standard that demands proof of egregious, clerical failures, not merely administrative inefficiency.

For practitioners, the takeaway is clear: interest abatement remains an uphill battle. Taxpayers seeking relief should focus on documented ministerial errors—such as lost payments, misapplied credits, or unexplained processing delays—rather than arguing that the IRS took too long to resolve a substantive dispute. The Tax Court’s message is unambiguous: "The mere passage of time in the litigation phase of a tax dispute does not establish error or delay." Unless a taxpayer can demonstrate that the IRS’s error was both unreasonable and ministerial, abatement will be denied. This case serves as a cautionary tale: patience with the IRS is not grounds for relief, and the high bar for abatement shows no signs of lowering.