Tax Bill & IRS FAQ

Questions:

• I am faced with a tax bill that I can't pay. Am I completely at the IRS's mercy, or do I have some options?
• I made a mistake on my tax return and am now being billed for the taxes, plus interest and penalties. Do I have to pay it all?
• Can the IRS take my house if I owe back taxes?
• Can the IRS charge me interest if I was incorrectly sent a refund and the IRS now wants it back?
• How legitimate are the seminars and books by "tax experts" claiming you don't have to pay income taxes?

Answer:

I made a mistake on my tax return and am now being billed for the taxes, plus interest and penalties. Do I have to pay it all?

Maybe not. The IRS must charge you interest on your tax bill, but penalties are discretionary. The IRS abates (cancels) one-third of all penalties it charges. The trick is to convince the IRS that you had "reasonable cause" (a good excuse) for failing to observe the tax law. Examples that might work include:

• serious illness or a death in the family
• destruction of your records by a flood, fire, or other catastrophe
• wrong advice from the IRS over the phone
• bookkeeper or accountant error, or
• your being in jail or out of the country at the time the tax return was due.

Start the process immediately. As soon as you receive a tax bill with penalties that you don't want to pay, write back and ask for an abatement. The best way to get the IRS's attention is to use IRS Form 843, Claim for Refund and Request for Abatement. You can also send a letter explaining why you incurred the penalty. Be sure to attach a copy of the IRS notice showing the penalty and any other documentation that helps explain your situation.