When taxpayers fail to pay their taxes and receive the IRS final assessment showing the total amount due the IRS, penalties and interest can sometimes exceed the total taxes due. Often taxpayers will ask the question: “If I pay the IRS the taxes that are due, will it forgive the penalties and interest?”
Let’s start with the forgiveness of interest because it is straightforward. The assessment of interest is governed by the Internal Revenue Code. Hence, the IRS has no authority to forgive interest. In other words, the IRS has no statutory authority to override Congressional law.
Since the interest assessment is based on the taxes and penalties owed the IRS, interest can only be reduced if the tax liability or penalty assessments are reduced. Accordingly, it often pays for a taxpayer to engage a tax resolution specialist to review the IRS assessments of additional taxes due and penalties. The IRS does have the authority to forgive (abate) penalties in certain circumstances. We will discuss the abatement of penalties for reasonable cause in a later blog post.
What may be a surprise to some taxpayers, the IRS does occasionally make mistakes when assessing additional taxes. We sometimes find that the IRS misinterpreted or failed to understand the law when assessing taxes due. If a taxpayer is represented by a tax resolution specialist who understands the tax law, the IRS exam division may be “shown the light” to reduce or eliminate the tax assessment. If exam does not make the requested change, the experienced tax resolution specialist will then represent the taxpayer at the Appeals Office where more experienced and knowledgeable IRS personnel will review the case and reconsider exam’s assessments.
Some taxpayers, after the IRS assesses additional taxes, interest and penalties, find themselves unable to pay the IRS in full and are placed in collections by the IRS and may have liens and levies placed on them, damaging their credit. If you find yourself in this position, Click Here to learn more about our 3-step process to resolve your IRS tax debts.
For those taxpayers who wish to learn more about IRS penalties, we suggest you read our book How to Resolve Your IRS Tax Debt Problems.
About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent who owns and operates Keystone Financial Solutions, Inc., a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
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