IRS Penalty Abatement

[Ml2000]

I received a letter from the IRS stating that I underreported my taxes for the year 2021. The reason for this under reporting was a retirement account that I cashed out, and I was told that all the taxes would’ve been taken out on it. Doing further researching, there should’ve been a document sent to me which was not sent to me due to me moving to a different state, and somehow getting lost in the mail. I have gone ahead and paid the amount that they proposed which was $6795 ($5335 tax owed, $1067 substantial, tax, understatement, penalty, $393 interest). My question is is there a way to file an appeal to get the substantial tax understatement, penalty, and interest taken off this bill since I was only $335 over the $5000 mark? Any help would be great and as always I appreciate your time. 

[Critter-3]

The 1099-R was not properly reported on the return  and the IRS caught it so if they are correct you must pay the taxes and interest due but you can ask for an abatement of the penalty since you did not understand that this needed to be put on the return since you thought "the taxes had already been paid on the distribution" instead of the withholding that actually happened.  

[MinhT1]

And in your case, the IRS may have levied the full tax on the underreported amount without taking into account the withholding tax you have already paid.

In this case, your short payment may be much lower and your tax and penalty may be greatly reduced.

You should consult a local tax preparer who will be able to advise you.