The Nature of IRS Penalties

Feelings of anxiety when talking about IRS penalties and back taxes are normal and valid. Fortunately, guidelines and processes directed to providing regular taxpayers some recourse when faced with IRS issues are available. Taxpayers can ultimately be released from back taxes and other penalties through negotiations and installment plans.

To review, circumstances like not filing tax returns, incorrectly filing of taxes, misleading the IRS and not paying quarterly taxes endanger taxpayers for penalties. For information on the complete list of penalties, including the processes on penalty abatement and assessment, you may refer to the Penalty Handbook. It becomes clear then that aside from the regular collection of taxes, the government also earns through the interests collected from delinquent taxpayers.

Fortunately, the government wants to ascertain that the IRS evaluates penalties correctly, thus, they have made several options available for taxpayers. With the recent changes on IRS policies, the process of dismissing tax levies is now relatively easy. While it is still slightly difficult in comparison to the nearly impossible battle it once was, times have changed significantly.

The IRS Penalties Handbook provides taxpayers with the opportunity to know more about interest, levies and abatement of penalties. When taxpayers exert the effort to educate themselves on how IRS penalties work, they considerably lessen their chances of being subjected to these consequences.

The IRS Penalty Policy Statement implies that penalties are in principle, no longer automatic. If you can prove that your actions were done in good faith, you may be eligible for the cancellation of some or all of your penalties or IRS abatement of penalties.

The IRS actually makes as much as $15 billion, on the average, on collection from penalties alone. While this is a good thing because this is a substantial source of income for the IRS, this is also too heavy on the part of the taxpayers.

What makes matters worse for some taxpayers is the accumulation of their original tax due and the applicable penalties. Occasionally, because interests are accrued on the new, larger sum, total amount due is doubled or tripled in just a few months. This results to difficulty in paying off the full amount.

When you are issued a notice that states that you are being penalized for owing the IRS money, one of the first courses of action to take is to respond to the IRS in writing and make a request for a cancellation of penalties. This is the initial step in the abatement process, which all taxpayers are entitled to. Provisions of all IRS penalties contain a “good faith exception.” This clause provides the IRS with the capacity to legally cancel your penalty if they decide that you did not intentionally attempt to defraud or mislead the IRS. Again, for many, IRS penalties may spell danger but alternatives and resources provided make this matter easier to confront.