Honest Tax Mistakes and Penalty Abatement - Don't Deal with the IRS Alone

The loss of a job, serious illness of a loved one, bad tax advice or a natural disaster can throw many people into financial distress often through no fault of their own. This overwhelming situation can cause even the most responsible financier to ignore financial obligations. Pile on top a confusing and complicated tax system and it's easy to see how honest mistakes can be made. Taxpayers experiencing unusual or unforeseen circumstances and who have failed to file (and pay) back taxes as a result of these circumstances; can request relief from the IRS in the form of penalty abatement.

Penalty Abatement forgives the penalties the taxpayer has incurred when reasonable cause prevents filing (and paying) on time. But while abatement works in many cases, not all taxpayers will qualify, and there is good reason - the IRS is a formidable debt collector who must be persuaded. If you are of the one in six Americans who is facing tax problems, consider hiring a Certified Tax Resolution Specialist. The specialist's firm will give you the upper hand and will be invaluable in negotiating your case. These professionals convince the IRS of your eligibility and argue for penalty abatement on your behalf supported by previous favorable tax court cases that are similar to yours. Combating the IRS directly is not a do-it-yourself project and without assistance, is ill advised. Would you go to court without an expert defense lawyer? Here are three pieces of information on how the IRS deals with honest mistakes and penalty abatement to help you make your decision about hiring a tax problem resolution specialist.

Penalty Abatement Reasonable Cause:
A common misconception is that the IRS forgives "honest mistakes." The IRS recognizes honest mistakes such as negligence but can still impose penalties. Deciding who qualifies for penalty abatement and for what reason depends on the circumstances of each situation and is determined on a case-by-case basis. However, in all situations reasonable cause must be established and includes one of the following in order for the IRS to consider abatement:

• Death or serious illness of a loved one.
• Drug or alcohol addiction and or rehab.
• Economic turmoil - tax penalties associated with back taxes and 401K withdrawal.
• Lost or stolen documents perhaps due to natural disasters such as wildfires or floods.
• Bad advice/counsel from incompetent tax preparer/tax attorney - To prove this you would need to present proof and provide documentation within a reasonable time frame which should be close to the taxes/penalties due. Typically between 1-4 years.

Honest Mistake: Negligence or Fraud? The IRS decides
While there has never been tax relief for an "honest mistake, to build a good case, the taxpayer should understand how the IRS views an "honest mistake" in tax negligence and tax fraud cases. Here is a simple explanation of the difference between the two:

• Negligence is viewed as an honest a mistake made on an income tax return. A mistake on your tax return might get a 20% penalty added to your tax bill.
• Fraud is the outright lying about income made in the previous year on an income tax return. The IRS can begin by tacking on a 75% civil penalty on top of your bill and continue piling on late filing and late paying penalties.

According to the IRS, approximately 75% of cases that claim negligence are often found to be fraud. If you are negligent, and fit the above IRS criteria, penalties may be waived. Fraud cases are much more complex; even so, both cases should be handled by the best tax problem resolution specialist you can find.

Proving Your Case to the IRS - Don't Go it Alone, Have Some Back Up
It can be indeed difficult to prove your case as the IRS is one of the most brutal collection agencies on the planet. And let's face it, the IRS isn't in business to write-off penalties, just the opposite. They exist to assess and collect taxes. Period. In a stepped up effort to collect from tax cheats, the IRS has recently hired between 4,000-5,000 new revenue agents to get the job done. When dealing with the IRS directly, you can find yourself, tricked into talking too much and duped into perjuring or incriminating yourself.

Lying to the IRS can make matters worse. If you are caught lying to an IRS employee you could face a felony conviction with up to three years in prison and a $100,000 fine! Most people don't know that there is a Tax Payer's Bill of Rights and the IRS is happy to keep it quiet. This law, enacted in 1998, functions like Miranda Rights do. It gives taxpayers the right to stop the conversation with an IRS employee and to instruct them that their representative will be in contact with them about this issue. A tax professional is better able to persuade the IRS than you are. When in doubt, don't say a word - remember: less is more.

In the eyes of the IRS, there is no "honest mistake" that will forgive back taxes. However, if you choose the right tax problem resolution specialist to represent your case, the matter will be resolved favorably and penalties reduced and your tax problems will become a thing of the past.

About The Author:
Michael Rozbruch, CEO and Founder of Tax Resolution Services
About Michael Rozbruch, CEO and Founder of Tax Resolution Services, Co., Michael Rozbruch is one the nation's leading experts on solving individual and business IRS tax problems. As a Certified Tax Resolution Specialist (CTRS), CPA (licensed in the state of Maryland), and member of the American Society of IRS Problem Solvers, he and his company have represented thousands of taxpayers who owe the IRS, but simply cannot afford to pay. Michael has been a guest speaker on over 200 radio stations across the country and has been interviewed on numerous TV news programs as a nationally recognized expert on tax resolution.