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Tax Tip of the Week | No. 465 | IRS Penalties – DON’T PAY Just Out of Frustration June 20, 2018

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Tax Tip of the Week | June 20, 2018 | No. 465 | IRS Penalties – DON’T PAY Just Out of Frustration

Is it a big-time hassle to deal with the IRS in any fashion? That is a big Y E S! In fact, it has never been more difficult. Maybe that is the IRS’s fault and perhaps it is the inevitable result of their budget being slashed. Regardless, attempting to communicate with them can make you crazy!

To give you some idea of the amount of civil penalties (via notices) assessed; in 2016, the IRS assessed 39.6 million taxpayers and abated 5.2 million of these. Considering the number of taxpayers in the USA, thusly, you have a relatively high chance of receiving a tax notice.

It is not uncommon for IRS notices to show balances due in the tens of thousands of dollars and to be very threatening. If you receive IRS correspondence – try not to overreact. Many people upon receiving IRS tax correspondence have a tendency to simply write them a check; they assume the IRS is always right. In fact, more than half of their notices are incorrect and only computer generated. Writing them a check without any further research probably makes sense if the IRS only wants a few bucks. Aside, from a few bucks being due, a quick telephone call to the IRS by your tax professional (not that the call hold time is quick) may be all that is necessary. Other times, a one-page letter to the IRS may be all that is needed to save the day and have the tax, interest and/or penalty abated. Other times, three or four letters, over an extended period of time, may be needed to receive a “yea” or “nay” to your request from the IRS. To avoid digging a deeper hole I would prefer that you do not call or correspond with the IRS on your own. A power of attorney is needed for your tax professional to have meaningful conversations and correspondence with the IRS.

One of the methods available for abatement includes the use of “administrative relief” under the “first-time penalty abatement policy.” The name “first time” is a misnomer, it doesn’t mean first time ever, just means you have been “clean” in the last three years… and yes, they do verify that.

Many other methods are available for potential abatement. But, remember, if your notice demands big dollars – get help.

Credit to… Tom Herman, Wall Street Journal “It May Pay to Fight IRS Penalties,” Monday, March 26, 2018

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.



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