San Mateo, CA: The IRS is not always right on penalty assessments and interest charged on outstanding taxes. Beware!

Many taxpayers falsely think when it comes to income taxes, what the IRS says is correct! Well, that is not the case every time.

When a client has a tax bill that has been outstanding for a while OR is subject to a tax penalty (and there are ALOT OF PENALTIES), the IRS can often rack up HUGE additional charges to add to the underlying tax liability.

Many clients feel OK paying the taxes that they owe, but get very upset and angry at penalties and interest charged to their bills. To make matters even worse---the interest that is charged covers not only the tax but the penalty amount also!

The interest that is charges changes quarterly. Currently, the interest is 7%. Interest is compounded daily and can really add up fast!

Few things to remember:

1. Some penalties can be easily removed if you have a "clean" tax history and meet certain criteria. These are fall under the category of First Time Abatement penalties.
2. Be watchful on the interest that the IRS charges. The final tax bill should show the breakdown of the amounts of interest per tax period. If you owed taxes for a long time and a lot of interest accumulated, there could be different interest charged at different rates.  The IRS is not always right--they make mistakes!!!
3. If you are facing large penalties and interest charges, you will want to have a tax professional take a look at the IRS bill. An independent analysis of your IRS transcript could save you quite a bit of money on your tax liability in the form of penalty abatement and interest adjustments.

Kevin Rego



Law Office of Kevin Rego

650.933.5222

www.regotaxlaw.com

Disclaimer: The information provided is intended to provide a general overview of the topic presented. It is not intended to be a legal interpretation of your individual tax or legal situation. If there is a conflict between the information provided and any legal authority implementing or interpreting the topic, the legal authority shall prevail. Always seek legal advice from a licensed attorney. This article does not in anyway establish an attorney-client relationship. That relationship can only be accomplished with both parties signing a mutual, written agreement.