Reply to IRS penalty- Settle or proceed to litigation?

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[quote=Anonymous]OP here.

$20k is a lot for me.

I did mentally prepare for the $10k that the CPA told me. I thought $10k (although still very painful) is still a tough price to pay for a first-time honest mistake. I am extremely diligent with deadlines- so I am really knocking myself on how I could have messed this up.

It is a bit unclear to me how much dialogue the Tax Attorney and the Appeals Officer will have, and if I should ask to be part of that conversation.

My thinking right now is to instruct my Tax Attorney to negotiate:

Offer 5k first. If no, then offer 8k. If no, then offer 10k.

My mental preparation was at 10k. Add the $4K fee to the Tax Attorney and the $1k fee to the CPA, and that brings my total mistake to $15k.

If Appeals says no to the 10k, my gut feeling is to go through with litigation.

The Tax Attorney said that if we go through with litigation, he can:

-Present the law that covers the abatement
-Present the "honest-mistake theory" (I didn't know that this is really a thing). 
-Provide background info on my diligence in doing the right thing, and reporting the error as soon as I realized it. I have given them a timeline, along with my email timestamps. I studied the filing process of the 3520 and FBAR very thoroughly- but again, mistake on the deadline of one of them.

If I litigate and get the refund, I'd be out... 9k for the success fee, 4k for the Tax Attorney (so far), and 1k for the CPA. That's $14k total.

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