Why Penalties? And Will the IRS Remove Them?
Trust is the cornerstone of any lasting relationship, wouldn’t you say? If you consider it, we as taxpayers are involved in a necessary “relationship” of sorts with the IRS, and I’m happy to report that (to an extent) the IRS trusts us. How so? Our nation’s tax system is based on voluntary reporting. We tell the IRS what our tax liability should be, we pay that amount and everybody’s happy. And the IRS takes our word for it, most of the time. But just to be sure, some tax returns go through the IRS audit process to see if we’ve made any mistakes. Taxpayers who have made a mistake or two are typically assessed penalties. On the other hand, taxpayers who have either not paid their taxes or have filed a return late are also penalized. IRS penalties range from slaps on the wrist, to millions of dollars and possibly imprisonment. Remember Wesley Snipes? Passenger 57 is turned into Inmate Number 43355-018. How about Lauryn Hill? It’s safe to say that her miseducation included tax compliance.
Penalties Encourage Voluntary Compliance, Right?
Penalties are assessed, the IRS claims, to encourage compliance. The fear of penalties is supposed to keep all of us in line, reporting and paying our taxes in a timely manner. The Service has built such an infamous reputation over time that more often than not, it works. After all, no sane taxpayer wants to be a flashing blip on the IRS radar. But what happens if you can’t meet your tax obligations due to extraordinary circumstances or an innocent mistake? Will IRS remove penalties?
The IRS may consider the abatement of penalties in cases that fall into four general categories:
- Reasonable Cause
- Statutory Exceptions
- Administrative Waivers
- Correction of Service Error
- Hazards of Litigation
Reasonable Cause for the Abatement of IRS Penalties
Reasonable Cause is the category most delinquent taxpayer’s hope to fall into when determining their chances of qualifying for the removal of penalties. The IRS has a wide range of circumstances that are considered Reasonable Cause. If any of the following have contributed to your tax accrual, you may be eligible for penalty relief:
Ignorance of the Law, Forgetfulness, Mistake was Made, Death, Serious Illness or Unavoidable Absence, Unable to Obtain Records, Statutory Exceptions, Undue Hardship, Written and Oral Advise from the IRS, Advise from a Tax Advisor, Fire, Casualty, Natural Disaster, or Other Disturbance.
If you hire M&M Financial to help fix your back-tax problem, we’ll have you send us the timeline and circumstances surrounding the accrual of your tax liability. We’ll prepare and submit your Penalty Abatement request and go thru the proper channels within the IRS to give you the best chance of penalty relief. M&M has been successful in removing millions of dollars in penalties for our clients.
Can You Guarantee Penalty Relief?
Although we’ve been very successful in saving our clients big money through penalty abatement, M&M never guarantees the abatement of penalties to our clients. No tax resolution company should. Just like the weather man can’t control the weather, a salesman can’t control the IRS and its penalty abatement decisions. If you are talking to a tax resolution company that guarantees penalty abatement or any reduction of your tax liability, turn the other way and run. Although M&M doesn’t guarantee tax or penalty reduction to potential or current clients, we can prove that we’ve been very successful at resolving and reducing tax debt since 2005.
Penalties are a large source of income for the IRS. According to the Internal Revenue Manual 22.214.171.124.1 (11-25-2011) “In 1955, there were approximately 14 penalty provisions in the Internal Revenue Code. There are now more than ten times that number.” IRS penalties range from a few dollars to millions of dollars. M&M has the experience to help you resolve and reduce you IRS tax debt. Contact us here or call us at (866) 487-5624 to find out how M&M’s Tax Resolution System can help you.