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You are allowed to request the IRS abate your penalties but not the additional tax that was added due to the disallowed expenses claimed.
You will need to explain the situation that caused you to claim the expenses and you will also want to remind the IRS that you have been compliant with all your tax filings in the past and since the action was taken against you. It is important to advise in your writing to them that you have not requested this action for abatement previously. (The last time I wrote such a request for a client, in spring of 2010, the agent informed them that they could only abate the penalty because it was their first time requesting an abatement of penalties.)
If you receive any notices from the IRS after you send the request for abatement, call them at the number listed on the notice and inform the agent of the abatement request so they can look into the matter for you. After your abatement of penalty request is accepted you will receive a letter with the new interest amount calculated.
Again, you can request they abate the penalties but interest and additional taxes will still be on the debt. Just put the information in your own words and explain the situation. Make sure you use the term abatement of penalties and remind them of the items I mentioned above.
I hope this information is helpful,