If you owe back taxes the IRS is constantly adding on interest and penalties to your balance. Your debt will grow about 2% per month in combined interest and penalties, adding nearly 24-25% to your balance every year. If you owe $10,000, after one year your debt grows to $12,400. Worsening your plight is that the IRS applies any payments or refunds to interest and penalties first, causing the "principle" of your tax debt to be reduced more slowly. This is one reason installment agreements are so expensive. Your payments are applied to principle and interest first, but the principle and interest continues to compound each month you are in the installment agreement. Consider these possible solutions:

First, a loan. If you're able to get a bank loan that can be a great help. Even with bad credit a bank's interest is lower, allowing you to chip away the principle more quickly. Try friends and family if you get no where with the bank. Paying the tax debt in full will allow you to keep your refunds each year, giving you additional funds to apply toward your principle. Second, if you can't get a loan hire a qualified professional to negotiate with the IRS on your behalf. Attorneys, CPAs and Enrolled Agents are admitted to represent taxpayers before the IRS. They can work to make sure your payments are applied to your tax debt, and limit the interest and penalties you end up paying. Lowering the principle will also lower the interest and penalties.

Third, if you have no other choice you can wait until your circumstances change. Worst case scenario is that you may have to wait for the Statute of Limitations to run out on your debt. The IRS has 10 years to collect tax from the date it is assessed. There are several things that can extend this collection period, educating yourself to avoid these actions will minimize any inadvertent extensions in the collection period. Of course this last option may not really be an option if you are faced with imminent collection activity like a tax lien, wage levy or property seizure. Truly your best option at preserving your rights and protecting your hard earned income is to hire a professional. If you're able to scrape up a few thousand dollars, hiring a professional is likely to yield better results than throwing that money at interest and penalties that accrue faster than your principle can be reduced.

3 Ways to Rid Yourself of IRS Debt and Its Accruing Interest and Penalties is a post from: IRS Tax Problem Solver Blog - IRS Help

As a taxpayer you can ask the IRS to reduce some or all of the penalties they may assess. Some of the most common penalties taxpayers face are: failure to file penalties, failure to pay penalties, late filing penalties, late payment penalties and failure to make timely estimated tax payments. According to the IRS penalty relief falls into four (4) categories; Reasonable Cause, Statutory Exceptions, Administrative Waiver, and Correction of Service Error.

Reasonable cause is based on all the facts and circumstances in each situation and allows the IRS to provide relief from a penalty that would otherwise be assessed. Reasonable cause relief is generally granted when the taxpayer exercises ordinary care and thought in determining their tax obligations but is unable to comply with those obligations. Reasonable cause relief is not available for all penalties and in some instances the taxpayer must also prove they acted in “good faith” and not because of “willful neglect.”

Penalty relief due to statutory exceptions are specifically referred to in tax legislation. The most common and recognizable statutory exception would be in the case of federally declared disasters and emergency areas. Closely associated with statutory exceptions, relief from penalties can result from an administrative waiver. Administrative waivers are commonly issued when there is a delay in IRS printing and mailing forms or publishing guidance as to a particular tax issue, which would be issued through an official IRS notice. Administrative waivers for penalty relief can also include undue hardships suffered by the taxpayer and erroneous written and/or oral advice from the IRS, which would be applied to a taxpayer’s specific circumstances.

The final category of penalty relief is Correction of Service Error. The IRS could make an error in computing tax and assessing a taxpayers account. Computer programming and mathematical errors by the service also fall under this category of penalty relief. A taxpayer should keep in mind they always have the right to request penalty abatement if they have reasonable cause, exercised good faith and the penalty was not the result of willful or intentional neglect.

For more information about how to get relief from IRS penalties view the video below.

Penalty Abatement is a post from: IRS Tax Problem Solver Blog - IRS Help

One of the IRS�s methods of punishing wayward taxpayers is to add penalties and interest to back taxes, failure to file cases or returns that have been filed late, and even if you fail to file the right tax return. Both penalties and interest charges are added automatically. Given these issues, many people have IRS Problems. If this is the case for you, investigating the possibility of removing both penalties and interest charges on the taxes you owe is worthwhile.

Penalties

There are five types of penalties the IRS uses: Accuracy, Fraud, Failure to File, Failure to Pay, and combinations of these penalties.

One way to remove penalties from your tax bill is to show reasonable cause. Reasonable cause can be identified in many ways. Common events the IRS will consider are:

� Forgetfulness
� Ignorance of the law
� Incorrect advice from the IRS
� Incorrect advice from your tax professional
� A mistake was made
� The inability to obtain records
� Serious illness or death
� Natural disasters
� Acts of God

As long as your reason shows that you did not intentionally cheat, deceive, or mislead the IRS, it can qualify as reasonable cause.

Penalty Abatement

You can request a penalty abatement in writing as soon as you receive your tax bill. IRS Form 843, Claim for Refund and Request for Abatement, is also available. Return the reasonable cause documentation along with a copy of your IRS Notice showing the penalty assessed. If you owe taxes and can pay them at this time, include your payment stating that this amount should go toward your tax portion of the bill. Do not forget to make copies of all your correspondence to the IRS.

Be patient as it may take more than one mailing to receive a response to your request.
It is also important to note that if your request for penalty abatement is denied, you cannot use the same grounds to make another request.

Interest

Removing interest charges from your tax bill is not easy, and most times, it is not an option. If the reason interest has been charged is because of an IRS error you will have more success.

Other circumstances that may allow interest to be removed include:

� If there were delays by the IRS.
� If a tax or penalty is abated.
� They may be decreased if you obtain an Offer in Compromise.
� Filing for bankruptcy. This should be used as a last resort and it should be noted that you might still owe taxes after the bankruptcy term.

Contact our office for more information regarding IRS interest and penalties or any other IRS Problems you might be experiencing. Our knowledgeable staff will be able to help you resolve your IRS Problems so you and your family will be worry free.

Removing Penalties and Interest Charges – Can you do that? is a post from: IRS Tax Problem Solver Blog - IRS Help

If you owe back taxes, your IRS Problems are accruing. What we mean by this is that the amount of taxes you owe is growing as both penalties and interest are being added. This growing amount can cause you and your family both financial and emotional stress. Let us explore the many types of penalties

The IRS uses penalties to punish taxpayers who file late, who pay their taxes late, who owe back taxes, who omit information on their returns, and who understate their income.

Types of Penalties

� Failure to File � You will pay 5% per month up to 25% if you file late.
� Failure to Pay � You will pay �% to 1% per month of the amount you failed to pay on time.
� Accuracy � You will have a 20% penalty added to your bill if you underestimate your income.
� Fraud � You will pay 75% of the amount you underreported or omitted; You will pay 15% for every month (up to 75%) if you failed to file a return.
� Combined � You will pay 5% per month if you file late and pay late.

With these penalties added to what you owe, your tax debt can increase quickly. One option you have if you are unable to file on time is to consider filing for an extension. With this option, you may be able to reduce or even eliminate the Failure to File penalty.

Taxpayers who can show �Good Faith and Reasonable Cause� can get these penalties cancelled. If you can establish that you did not deliberately set out to cheat, mislead, or deceive the IRS, then the penalties do not apply.

Good Faith

Examples of �Good Faith� include ignorance of the law, reliance on counsel, reliance on IRS advice, and notice requirement.

� Ignorance of the Law � You will need to prove that you did not know you had done anything incorrect.
� Reliance on Counsel � You will need to prove that you provided all the needed information and that you followed the advice of your counsel. Counsel includes tax preparers, attorneys, accountants, and enrolled agents.
� IRS Advice � You will need to provide a copy of the letter that contains the advice you received from the IRS.
� Notice Requirement � You are �on notice� regarding a decision on your tax return by the IRS even though you are not able to read every IRS publication to know all the rules and regulations.

Reasonable Cause

Here are a few examples of �Reasonable Cause�:

� Medical issues including death, injury or prolonged illness
� Traumatic issues which cause serious disruption of your life such as moving or natural disasters
� Personal problems including divorce, substance abuse, etc. by a family member that cause financial problems
� Financial problems which involve loss of a job or failure of a business
� Necessary records that have been lost or are unavailable not due to negligence

In fact, any reason that can be established showing you did not deliberately intend to cheat, mislead, or deceive the IRS can qualify as reasonable cause.

Let our knowledgeable staff help you understand these complicated issues. Contact us today if you need IRS Help so we can help you solve any of the IRS Problems you may have.

IRS Penalties – Can You Get Rid of those darn Penalties?? is a post from: IRS Tax Problem Solver Blog - IRS Help