The Nature of 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, guidelines and processes directed to providing regular taxpayers some recourse when dealing 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 a more comprehensive reference, you may consult the Penalty Handbook, which outlines all possible penalties and tackles the processes on tax penalty abatement and IRS penalty assessment. It becomes clear then that aside from the regular collection of taxes, the government also earns through the interests gathered from delinquent taxpayers.

Since 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 in comparison to the outrageous battle it once was.

Taxpayers learn about interests, levels and abatement of penalties by reading the IRS Penalties Handbook. When taxpayers take the time to educate themselves on how IRS penalties work, they considerably reduce their chances of being subjected to these consequences.

Fortunately, penalties are no longer automatic, as indicated in the IRS Penalty Policy Statement. You may qualify for an IRS abatement of penalties, or a cancellation of some or all of your penalties, if you can justify your actions and prove that they were done on good faith.

You may ask how much the IRS makes from the collection of penalties alone. Approximately, the total often amounts to over $15 billion. Not only is this a substantial source of income for the IRS, conversely, it is also the cause of a great amount of frustration on the part of taxpayers.

The situation worsens, for some people, as the penalty is added to the total amount of tax due. Interest is then accumulated based on this new, larger sum. The interest that the IRS charges on any tax debts is generally quite large with levels as high as 25%. With this, the debt can be doubled or tripled over a very short span of time, making it hard for people to settle the entire amount due.

When 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 beginning of the abatement process, which, fortunately, is a right given to all proplr. Provisions of all IRS penalties contain a “good faith exception.” This states that if it proven that you did not purposely attempt to defraud the IRS, the latter can actually legally cancel the penalties enforced on you. Again, IRS penalties can be quite intimidating to common taxpayers, but the presence of alternatives and resources make this matter easier to manage.