The Internal Revenue Service is mandated by law to actively pursue people with tax liabilities. If it has no teeth, tax evaders will not be afraid of the agency. We can help give relief to these penalties. Thus the government has given the IRS the power to enforce harsh penalties for errant taxpayers. These penalties can definitely affect the financial freedom of any person and a goal would be to reduce IRS penalties.
However, there are always various reasons why people fail to file their taxes or to pay the full amount due. The IRS knows there must be room for compassion; this is why they created the IRS Penalty Abatement petition. Under this arrangement, the penalties on your tax liabilities can be reduced or even erased.
The penalties are set in place by the IRS to send a message to taxpayers that compliance with tax laws should be strictly observed. However, if a taxpayer has enough “reasonable cause” to justify their failure to do so, the IRS should be considerate. Taxpayers should never be afraid to challenge, question and appeal when a penalty is enforced on them.
The term “reasonable cause” is determined subjectively. If the failure of compliance is caused by difficult circumstances, the IRS should have the good faith to conduct an investigation of the reasons behind this tax difficulty. There are five basic and typical reasons behind tax penalties:
To provide an example of how severe these penalties are, let’s take an example of a fraud penalty. If you willfully underreport your income by about $100,000, the IRS will issue a fine of 75% of the underreported amount. The penalty will become $75,000 – not including the interest yet.
The Premise of Reasonable Cause as a method to reduce IRS penalties
The Internal Revenue Manual provides the context of the term “reasonable cause.” It may be a subjective concept but it has clear guidelines.
The IRS is not a bunch of stone cold people so you have a chance to reduce IRS penalties. They are just doing their jobs to improve the tax collection in the country. If the reasonable cause of your case is compelling enough, the IRS will provide means to help you overcome and manage your tax debts.
By: Timothy S. Hart
Our New York tax law firm offices are located in New York State but we are able to help you in any state across the country. We can work with you no matter where you live. Mr. Hart is licensed to deal with the IRS in every state in the entire country.