Information About IRS Penalties

Taxpayers usually feel apprehensive when faced with the possibility of being penalized by the IRS or having to pay back taxes. What they do not know, however, is that there are set guidelines and procedures that will help them manage this kind of problem. These include negotiations and setting up of installment plans, all aimed at eventually dismissing probable penalties and back taxes.

To review, cases like not filing tax returns, incorrectly filing of taxes, misleading the IRS and not paying quarterly taxes jeopardize taxpayers for penalties. For a more comprehensive reference, you may consult the Penalty Handbook, which lists all possible penalties and tackles the processes on tax penalty abatement and IRS penalty assessment. This goes to show then that aside from the taxes collected, the government also earns from the interests enforced on some delinquent taxpayers.

Because the government wants to ensure that IRS penalties assessment is exercised properly, it provided taxpayers with several courses of action and made the process of releasing tax levies relatively easier. The process is now friendlier in comparison to the outrageous battle it once was.

The IRS Penalties Handbook provides taxpayers with the chance to know more about interest, levies and abatement of penalties. When taxpayers are well-informed about the nature of these penalties, they will discover ways of reducing their odds of being subjected to these as well.

One of the primary advantages of the IRS Penalty Policy Statement is that IRS penalties are technically 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 deliberate negligence and intention of defrauding the IRS on your part. When this happens, it is called an IRS abatement of penalties.

You may ask how much the IRS earns 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. As an effect, the new larger sum becomes the base amount of the interest. The interest that the IRS charges on any tax debts is generally quite large with levels up to 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 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 stage in the abatement process, which all taxpayers are entitled to. 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, IRS penalties can be quite threatening to common taxpayers, but the presence of alternatives and resources make this matter easier to handle.

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