Penalty abatement is an abatement of the penalty and interest accrued on the penalty for a tax year. Please note: Interest is by no means is abated either with the IRS/States. If someone tells you that interest can be abated, it’s a LIE. Only the interest on the penalty is abated. Most states offer penalty abatement but the rules for each state contrast. Most states will not abate any penalties until the original tax is paid in full and some will abate penalties if the IRS has approved any abatement for a tax year.