In general, people feel uneasy when confronted with possible IRS penalties like the payment of back taxes.
Unbeknownst to them, there are actually guidelines and procedures that will help them contend these issues.
These include negotiations and setting up of installment plans, all directed at eventually dismissing probable penalties and back taxes.
To review, taxpayers may be obliged to incure IRS penalties in circumstances like not filing tax returns, incorrectly filing of taxes, misleading the IRS and not paying quarterly taxes.
For information on the complete list of penalties, including the processes on penalty abatement and assessment, you may refer to the Penalty Handbook.
It becomes clear then that aside from the periodic collection of taxes, the government also earns through the interests collected from delinquent taxpayers.
The government provided taxpayers with several courses of action and made the process of dismissing tax levies relatively easy because it wants to be sure that penalties assessment is done in the right manner.
Compared to the outrageous battle it once was, the process is now friendlier.
Taxpayers are educated with the basics of interests, levies and penalties abatement when they make time to browse through the IRS Penalties Handbook.
With this set of information, the risks of being penalized are significantly decreased.
One of the primary advantages of the IRS Penalty Policy Statement is that IRS penalties are technically no longer automatic.
You may, in fact, qualify for a cancellation of some or all of your IRS tax penalties if you can prove that there was no deliberate negligence and intention of defrauding the IRS on your part.
When this happens, it is called an IRS abatement of penalties.
The IRS actually makes as up to $15 billion, on the average, on collection from penalties alone.
On top of the fact that the IRS earns a considerable amount of money from this, the fact is, this is too heavy a load for the taxpayers.
What makes circumstances worse for many people is that when a penalty is given to them, that amount gets added to the total amount of tax debt.
As a result, the new larger sum becomes the basis of the interest.
The interest that the IRS charges on any tax debts is generally quite large with levels as high as 25%.
Over a very short period of time, this can actually double or even triple the total amount of debt, making it significantly more difficult for the taxpayer to settle the entire amount.
When you receive an IRS notice stating a possible problem resulting from some tax dues, you can actually respond and request from them a cancellation of these penalties.
This action indicates the beginning of the penalties abatement process, which is a right all taxpayers can take.
If proven that you did not willfully defraud the IRS, the "good faith exception clause" in the provisions of IRS penalties can actually be used.
In summary, despite the fact that IRS penalties pose a threat to you and your assets, their effects can be neutralized, if not altogether eliminated, through the use of legal alternatives.