The IRS will reduce some penalties...but you have to ask
You may heard that the IRS won't negotiate on penalties. You may have even heard that from the IRS. Like many things you may hear from-and about-the IRS, this notion is false. In fact, in a recent report approximately 1.45 million taxpayers who should have received relief from penalties didn't get it - totalling close to $181 million dollars the IRS kept that they shouldn't have.
Is this too good to be true? I think not.
The report, from the Treasury Inspector General for Tax Administration, noted that the Tax Code imposes penalties on taxpayers with a filing requirement who fail to file a tax return or fail to timely pay the full tax shown on any tax return. The IRS waives those penalties for taxpayers who have demonstrated full compliance over the prior three years, but only if the taxpayers request penalty relief. The IRS does not widely publicize the opportunity to request this waiver, known as a First-Time Abate.
The reason for granting the First-Time Abate is to reward past tax compliance and promote future tax compliance. However, most taxpayers with compliant tax histories are not offered and do not receive the waiver, TIGTA found. For tax year 2010, TIGTA estimated that approximately 250,000 taxpayers with failure-to-file penalties and 1.2 million taxpayers with failure-to-pay penalties did not receive penalty relief even though they qualified under First-Time Abate waiver criteria. TIGTA estimated the unabated penalties totaled more than $181 million.
“Penalty waivers should not be granted only to taxpayers or preparers with knowledge of IRS processes,” said TIGTA Inspector General J. Russell George in a statement. “If the IRS does not administer these and other penalties fairly and accurately, taxpayers’ confidence in the tax system will be jeopardized."
As I've stated in the past, just because the IRS sends you a bill, it doesn't mean it's accurate.
If you've received a bill from the IRS you don't understand or don't think you owe, give us a call and we'll be happy to discuss it with you.