I am a Forensic CPA; I work with taxpayers looking for help resolving tax disputes between themselves and the IRS and/or state tax authorities. My office is located in Edina, MN, however, my client base is spread throughout Minnesota. Because of COVID, the IRS temporarily scaled back its efforts to collect unpaid taxes. Recently, the IRS has gone on a hiring spree and become more vocal about collecting unpaid taxes. It is only a matter of time before collection notices and levy’s start to appear in the mailboxes of taxpayers with unpaid taxes.
If you receive a notice from the IRS for an unfiled tax return or unpaid taxes, chances are pretty good that there will be some IRS penalties and interest charges to pay as well. Forgive me if I state the obvious, but no one likes to pay penalties. So, why do penalties exist? Good question. Let’s explore.
The word penalty is defined as a punishment for breaking a rule, law(s), or contract. The IRS uses penalties to encourage voluntary compliance with the rules contained in the Internal Revenue Code. In 1954 the Internal Revenue Code contained approximately 14 penalty provisions. Today, there are more than 145 penalty provisions in the Internal Revenue Code. Some of the more common penalties include failure-to-file (FTF), failure-to-pay (FTP), failure to timely deposit (FTD), trust fund recovery (TFRP), accuracy related penalties, undisclosed foreign asset penalties and fraud penalties.
The IRS has taken steps to maintain a fair, consistent and comprehensive approach to penalty administration. The steps include maintaining a single consolidated handbook on penalties for all employees, reviewing communications with taxpayers and developing a Master File database to provide statistical information regarding penalty administration.
In all honesty, the reasoning behind the penalties assessed by the IRS is no different than penalties for speeding, late mortgage payments or credit card payments. The good news is that there are ways to modify, reduce and even remove penalties assessed by the IRS. I will examine some of the ways to modify, reduce and remove the penalties in upcoming blogs.
If you or someone you know has unpaid taxes or other federal or state tax issues and you are looking for some peace of mind, please feel free to contact me at either (952) 405-2082 or by email at fnutecpa@gmail.com.
Frank Nute MS, CFE, CPA, CFF, CGMA, CTRC
Frank E. Nute Certified Public Accountant PC
3300 Edinborough Way #550
Edina, MN 55435
Ph. (952) 405-2082
Fax (952) 405-2083
fnutecpa@gmail.com
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