The IRS's operation handbook, the Internal Revenue Manual, sets out general rules
for negotiating penalty abatement. The ability to grant relief from penalties falls into four categories: reasonable cause, statutory exceptions, administrative waivers and correction of service error. The most flexibility in the area of reasonable cause when it comes to negotiating a settlement for a penalty. The IRM states, "Reasonable cause relief is generally granted when the taxpayer exercises ordinary business care and prudence in determining their tax
obligations, but is then unable to comply with those same obligations."
To avail a waiver on tax penalties, you have to fill up the form 2210
. Provide as much supporting evidence as possible.
The IRS is less likely to abate late filing penalties than underpayment penalties
, the reasoning being that there are less good reasons for late filing than late paying.
Good luck. I hope it turns out ok.