This is an excerpt from Chapter 12 ("Slaying IRS Penalties") from Chad Silver's book Stop the IRS. It deals with the topic of penalty forgiveness, and outlines some of the common reasons that people qualify for removal of tax penalties.
The IRS loves to send out a bill for your owed taxes; when you pay them late or there is some other inconsistency, you can end up with one or more penalties. With a rainbow of choice from over 100 different penalties, the IRS is never at a loss to find a suitable penalty to throw at you. Worse, most penalties are handed out to those already having a serious back tax problem.
Forgiveness - an IRS anomaly
Our next secret that many do not know is that 50% of penalties are forgiven. Like sins after confession, the IRS simply washes penalties away - But only if they feel like it and only if you represent yourself well.
Just like the other cash the IRS is trying to pry out our pockets, there is a limit to what they can take and they are aware that pushing too hard often results in a total non-payment by the tax debtor. Penalties are not simply waived away with a magic wand - you have to represent your case and make it clear that for an acceptable reason the penalty was not appropriately applied in your case. This might include arguments such as:
- Spouse who passed away
- Destruction of records relating to the tax issues
- Unemployment, Job loss, or wage reduction
- Not understanding complex tax laws
- Medical problems with you or your dependents
- Simple inability to pay
- Away from your "Tax Home" the place where your local tax office contacts you (a truck driver for example might be away from home for a lengthy period).
- Poor advice by a CPA or other professional - or even just by a trusted friend can be enough.
- Whatever you can think of that might fall into the realms of acceptability as an excuse not to pay...note: "my dog ate my tax return" will not be accepted!
Whatever your reason for non-payment, late returns, request for a penalty abatement or forgiveness, make sure you do not falsify verbal or written information. Do not attempt to provide or direct them towards fake evidence. This will incur a forceful application of all the penalties and tax collection proceedings available to the IRS and possibly your "15 minutes of fame" before a judge with the inevitable consequence of a criminal fraud prosecution and an accompanying lodging in a federal penitentiary.
The good news is that your imagination is the limit in penalty abatement requests. The IRS has leeway in the respect that they can make a judgment call based on criteria outside the usual policies and rules they have carved from stone, and adhere to like glue. They can cancel a penalty without further ado if they choose to.
Want to learn more about how you can qualify to be one of the 50% who have their penalties removed or severely reduced? Contact us today to set up a free, no-obligation consultation.