Does the IRS ever forgive interest and penalties?

Many people who owe taxes more than five or six years old find that the interest and penalties are more than the original tax.  This is because penalties keep being added for several years.  In fact, there are more than 170 penalties the IRS can levy.  In addition, the IRS compounds interest daily, so that adds up really fast. The answer to the question depends on the type of deal that is made with the IRS.  If you enter into an Installment Agreement, you will have to pay the accrued interest, which continues to accrue until the balance is paid in full, but the penalties might be forgiven if you have reasonable cause for being behind in payments.  However, the IRS will not consider your request for abatement of penalties until the underlying tax is paid.  If you file an Offer In Compromise and it is accepted, then your entire liability, i.e. taxes, interest and penalties, is considered paid in full for the lesser amount of the compromise; therefore, the issue of forgiving interest and/or penalties never arises.