I am currently being audited by the IRS. The agent has prepared a preliminary report showing a tax owed of about $7,000 for the tax years 05 and 06. She has also computed interest and penalty. I argued against both, because I was previously audited, twice, in tax years 2000, 01 and 02 and received a “No Change” letter and an Income Tax Examination Report that resulted in zero Balance Due. The earlier audits were completed in 2004, just before the tax years now in question. The tax owed relates to depreciation on the business expense claimed for the use of my company’s boat. I am a sole proprietor and file a Schedule C. The prior audits looked into those expenses and did question, but did not deny them. The current agent says that she is willing to withdraw a claim for penalties because of the prior recent audits, but she says she cannot withdraw the claim for interest. She stated that the IRS software won’t even allow her to zero out the interest. In your experience, can or has the IRS withdrawn a claim of interest on taxes owed. Thank you in advance for your reply.