- Offer In Compromise: I bet you didn't know what this is, or, if you did you didn't know what to do. An offer in compromise is you owing $$ and offering to pay a lesser amount. If they accept your offer, then the account is considered "paid in full". You don't want to make a ridiculous offer such as owing $20,000 and only offering to pay them $1,000. If you're reasonable, they will be also.
- Penalties and Interest: this is a tough one. Convincing them you aren't liable for interest and/or penalties is almost impossible. I'm not saying don't try, it can't hurt, but the likelihood of them reducing or eliminating them is almost nil. Penalties and interest are by law (those Congress guys/gals again) and there is only a tiny portal you might be able to squeeze through. Good luck with this one. Sorry I can't help you there.
- How To Avoid Penalties and Interest: File Your Return On Time! Or, get an Approved Extension! Pay what you owe on time (by April 15th). This will help you tremendously when trying to prove that you were trying your darndest to be honest with your income and expenses. One thing to remember, unless your income is so low that you aren't required to file a return, file one even if you don't have all of your information documents (W-2, Form 1099, etc.), and if you're still waiting for documents, estimate to the best of your ability. You're better off if you over estimate your income and/or underestimate your expenses/deductions than not filing a return at all.
- Types of Penalties: failure to file penalty, late filing penalty, and late payment penalty. These are the three biggest ones. If you don't file a return you'll be slapped with the failure to file penalty (if you are not required to file a return, i.e. not enough income, this will not apply). If you file your return late (after April 15th), you'll be stuck with this one, the late filing penalty (does not apply if you have a valid extension). If you owe taxes and don't pay by April 15th, you are liable for the late payment penalty.
- Request a Payment Plan: I can't emphasize this enough, if you can't pay the entire amount in full, request a payment plan! Don't be shy, just ask.
- Making Your Payments: this is VERY VERY IMPORTANT...don't wait until April 15th to make your payment, mail it way before the 15th so they HAVE it by the 15th. You'll be slapped with a penalty for being late if they don't receive it by the 15th. If you have a payment plan in effect, DO NOT BE LATE! The payment must be received by the payment date. In other words, if your payment is due on the 12th, it must be received by the 12th. Whether or not they have actually processed your payment is unimportant. If you are late by even one day, it will nullify your payment plan and you'll have to request another one. The second time you request a payment plan may or may not be accepted, only the first request is guaranteed. If you can make extra payments, do it. The interest will be reduced automatically by the system every time you make an extra payment.
- Fraud: don't do it. Don't purposely underreport your income or overreport your expenses. They can get you for fraud which will win you jail time and a hefty fine!
I hope all of this information is helping you in some way. Believe it or not, I wasn't well liked by management because I was not interested in their crap but only interested in doing things the right way and helping other employees do the same. I always followed the law as was given by Congress and never tried to twist it like upper management did. Later in my blogs I'll also tell you some very interesting stories about taxpayer letters we received, and, some not so nice things upper management did to the employees.
Blessings To All,
katyscooter1
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