What You Need to Know About IRS Penalties
There are several valid reasons why taxpayers generally feel at least a slight apprehension when talking about IRS penalties and paying back taxes. Fortunately, guidelines and processes aimed at 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.
There are numerous instances when penalties that can be imposed on tax payers. Some of these are a result of not filing a tax return, incorrectly filing, intentionally misleading the IRS, and not paying quarterly taxes. To learn more about this matter, you may refer to the Penalty Handbook, which an entire collection of IRS penalties, penalty abatement guidelines and assessment procedures. Keep in mind that the government also earns money from penalties levied on taxes, aside from the mere collection of taxes.
Because the government wants to ensure that IRS penalties assessment is done properly, it provided taxpayers with several courses of action and made the process of dismissing tax levies relatively more friendly. The process is now friendlier as opposed to the outrageous battle it once was.
With the IRS Penalties Handbook, taxpayers are informed of the basics of interests, levies and penalties abatement. With this set of information, the risks of being penalized are greatly decreased.
Fortunately, penalties are no longer automatic, as stated in the IRS Penalty Policy Statement. If you can prove that your actions were done in good faith, you may qualify for the cancellation of some or all of your penalties or IRS abatement of penalties.
On collection from penalties alone, the IRS makes as much as $15 billion, on the average. 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.
The situation worsens, for some people, because the penalty is added to the total amount of tax due. Interest is then accrued based on this new, larger sum. 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 settle the entire amount.
If you are issued with 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 start of the abatement process, which, fortunately, is a right given to all taxpayers. Provisions of all IRS penalties contain a “good faith exception.” This states that if it proven that you did not deliberately attempt to defraud the IRS, the latter can actually legally cancel the penalties enforced on you. Again, for many, IRS penalties may spell danger but alternatives and resources provided make this matter easier to confront.
Filed under Blog by on Oct 12th, 2009. 
