Everything You Need to Know About IRS Penalties

There are many valid reasons why taxpayers generally feel at least a little apprehension when talking about IRS penalties and paying back taxes. Fortunately, unknown to many, there are actual guidelines and procedures set in place that are designed to give regular taxpayers some recourse when dealing with an IRS penalty. Taxpayers do have the ability to negotiate down, set up installment plans, and even go through processes which may eventually dismiss any back taxes and penalties that may have been levied by the IRS.

There are numerous instances when penalties that can be enforce on tax payers. These include among others, not filing a tax return, deliberately misleading the IRS and not paying quarterly taxes. To know more about this matter, you may refer to the Penalty Handbook, which an entire collection of IRS penalties, penalty abatement guidelines and assessment procedures. Remember, the IRS does not receive all of their money from simply collecting taxes, but also from penalties levied on taxpayers.

With the intention of making certain that the IRS does the penalties assessment correctly, the government made several options available for all taxpayers. Recent amendments to the IRS policies now make the process of dismissing penalties a relatively easier one. While it is still slightly difficult in comparison to the nearly impossible battle it once was, times have changed considerably.

Taxpayers are educated with the basics of interests, levies and penalties abatement when they take the time to browse through the IRS Penalties Handbook. With this knowledge, the risks of being penalized are greatly decreased.

Today, as stated in the IRS Penalty Policy Statement, IRS penalties are no longer automatic. You may, in fact, qualify for a cancellation of some or all of your IRS tax penalties if you can justify that there was no willful negligence and intention of defrauding the IRS on your part. When they are cancelled, it is called an IRS abatement of penalties.

How much money does the IRS earn in terms of collection from penalties alone? On the average, the total often amounts to over $15 billion. Not only is this a big source of income for the IRS, conversely, it is also the cause of a great deal of frustration on the part of taxpayers.

The situation worsens, for some people, because the penalty is added to the total amount of tax due. As a result, the new larger sum becomes the basis of the interest. Interests on tax debts actually go as high as 25%. In just a very short period of time, this can actually double or even triple the total amount of debt, making it significantly more difficult for the taxpayer to pay off the full amount.

When you are given a notice stating your IRS penalties, the first thing that you have to do is make a written request for the cancellation of this. This is the initial stage in the abatement process, which all taxpayers are entitled to. All of the IRS penalties contain a “good faith exception” clause written into their provisions. This clause provides the IRS with the ability to legally cancel your penalty if they decide that you did not intentionally attempt to defraud or mislead the IRS. To reiterate, for many, IRS penalties may spell danger but alternatives and resources provided make this matter easier to deal with.

Be Sociable, Share!

•