Reducing IRS PenaltiesTax Professionals Resource
September 6, 2012 — 1,209 views
Dealing with the Internal Revenue Service (IRS) following tax issues
such as late payments, failure to file or underpayment of taxes can be a
financial disaster. Not only does a taxpayer owe the IRS the money that was
originally due, but penalties added to the amount due can make these payments
overwhelming and even impossible to make. Read on to learn how to reduce IRS
penalties to make tax debt more manageable.
Utilizing IRS Penalty Abatement
A penalty abatement is extended to a taxpayer that is able to pay their tax
debts immediately. The penalties may be completely eliminated if the taxpayer
can prove that the action that led to the assessment of penalties was beyond
Examples include natural disasters that rendered the taxpayer unable to access
documents or financial resources necessary to file taxes, major interruptions
in the taxpayer's life including incarceration, loss of essential records due
to theft or destruction that the taxpayer was unable to prevent or relying upon
the advice of a fraudulent tax professional.
Qualifying for a penalty abatement involves composing an articulate petition
that explains the reasons behind the request. It is best to pay the full amount
owed if possible and request a refund of the penalty amount.
Offer in Compromise
Taxpayers that are able to prove an inability to pay tax debts can file for an
Offer in Compromise. An Offer in Compromise is essentially a settlement of tax
debts with the IRS. The taxpayer will be required to pay the entire compromised
amount immediately, but this amount is often significantly less than the total
of tax debts, fees and penalties.
It is essential that a person requesting an Offer in Compromise file taxes on
time in the future and pay tax debts in full. Diverging from this path can lead
to a voiding of the Offer in Compromise agreement.
Partial Payment Installment Agreement
This option allows taxpayers to both reduce the total amount owed to the IRS
and make payments on a tax debt. The taxpayer must agree to allow the IRS to
automatically withdrawal payments from the taxpayer's bank account in order to
satisfy the payments that are due on the installment agreement.
Eligibility for this option is determined by a thorough examination of income,
expenses and property ownership. The IRS typically takes 30 days to inform a
taxpayer of their decision regarding a request to set up a partial payment