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How can I get the IRS to reduce the penalties I'm paying on my back taxes?

I can't afford to hire an accountant.
Roni Lynn Deutch answered August 9, 2010
URL: http://www.entrepreneur.com/answer/222137
I applaud your proactive efforts to resolve your IRS tax debt. If you are trying to get your penalties and interest abated, here is what you need to know. First, you should know that it is possible to negotiate for an abatement of penalties and interest, but it is at the discretion of the IRS agent with whom you are working.

Second, it takes time, sometimes a year or two, to negotiate with the IRS for a reduction of interest or penalties. So, this is not a quick, easy fix.

To start, fill out Form 843 Claim for Refund and Request for Abatement (found here: http://www.irs.gov/pub/irs-pdf/f843.pdf ). There are no hard-line standards for when the IRS will reduce your interest or penalties, and they can opt not to if the agent sees fit.

That being said, you are speaking with human beings who have hearts. You are more likely to be successful in negotiating a reduction in penalties if your tax debt was a one-time event stemming from some pretty extreme circumstances. According to some experts, the IRS may choose to abate your penalties if your tax debt resulted from one of the following:

- Death or serious illness of the taxpayer or immediate family.
- Unavoidable absence.
- Destruction of the business or records by fire or other casualty.
- Inability to determine the tax because of reasons beyond the taxpayer's control.
- Civil disturbances.
- Lack of funds, but only when the taxpayer can demonstrate the exercise of ordinary business care and prudence.
- Other reasons establishing that the taxpayer exercised ordinary business care but could not comply within the prescribed time limits.

As for interest, this is much more of a shot in the dark for you. Generally, the IRS will only agree to reduce interest if the IRS made an error or somehow delayed your tax case, causing the interest to pile up.

If you have ever had dealings with the IRS, you probably already know that it is very difficult to get the IRS to admit to an error, but if you believe this is the case, then make sure you have some documentation or a detailed contact log to prove your case. With the IRS, you are always considered guilty until you can prove your innocence.

You can absolutely do this on your own, without a professional. Your best bet is to speak with the IRS agent you have already been working with. If you've shown good faith efforts to resolve your debt--and it sounds like you have--then the agent may be more receptive to your request.

Just expect to spend a lot of time on hold, and a lot of time searching for backup documentation. You will need to explain why you had this problem in the first place. Make sure you can speak clearly and coherently about whatever events lead up to the debt.

Roni Deutch is known as "The Tax Lady" for a reason: She has two decades of practical experience resolving IRS tax problems and preparing taxes for taxpayers nationwide. Consequently, she has become a well-known media personality and one of the few go-to tax experts in the country. She is the founder and owner of the nation's largest tax resolution law firm, Roni Deutch, A Professional Tax Corp.