Difficulty In Resolving Tax Debts

While settling tax debts, or back taxes, isn’t all that difficult in itself, there are a few aspects of the process that often produce snags for taxpayers. The IRS is quick to act on unpaid taxes and may implement certain consequences for non-payment, which often takes the form of delinquencies fees. Once assessed these IRS penalty fees can be difficult to have removed from the total tax debt bill.

Penalties and Payment

Tax penalties boil down to one fact: the IRS treats taxes, penalties and interest on unpaid taxes all the same. This means that when the IRS assesses penalties and interest fees to a taxpayer’s overall tax liability bill, all of the charges are rolled into one lump sum. It all becomes the principal amount of debt owed.  So what can be done?

There are a two ways to attempt to resolve IRS penalties on unpaid taxes. First, you can initiate the penalty abatement process. By law, the IRS must consider forgiving or “abating” any penalties they assess against a taxpayer if requested. However, it is up to the taxpayer to prove that “reasonable cause” exists that caused the non-payment of the taxes, which resulted in penalization.  Secondly, you can attempt to negotiate the repayment of your tax debt charges into smaller payments. The IRS offers two programs to help taxpayers resolve their tax debt, and penalty fee, charges: an installment plan and an Offer In Compromise.