It is suggested you pay the underpayment penalty with the return AND request an abatement for cause. If the abatement request is successful the IRS will refund the penalty. If not there is no additional interest to be assessed, provided the underpayment penalty is based on an underpayment of less than 25% of the tax owed.
The IRS may provide administrative relief from a penalty that would otherwise be applicable under its First Time Penalty Abatement policy.
You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service's First Time Penalty Abatement policy if the following are true:
- You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
- You filed all currently required returns or filed an extension of time to file.
- You have paid, or arranged to pay, any tax due.
The failure-to-pay penalty will continue to accrue, until the tax is paid in full. It may be to your advantage to wait until you fully pay the tax due prior to requesting penalty relief under the Service's first time penalty abatement policy.
Other administrative relief: If you received incorrect oral advice from the IRS, you may qualify for administrative relief.
The link below is from the IRS web site for Penalty Relief.
Penalty Relief per the IRS
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