How to ask the IRS to give me a break

November 19, 2006 9:02 PM

How do I approach the IRS? They got me - dead to rights - I screwed up a few years back, when rolling over my 401K into a IRA (then into a downpayment for my house). I *thought* my credit union paid taxes on that money when I rolled it over. I made a mistake. Now, that I'm "caught up", and ready to pony up the delinquent taxes, what the best way to ask the IRS to waive the penalties? Say "Pretty, please?" Everyone says one *can* negotiate with the IRS. So how, would one go about doing so? What might one do to make a positive outcome more likely?
posted by derekb to law & government (9 comments total)

Do you have the name of a contact? On the letterhead that you got the notice on perhaps?

The key to getting your way with any monolithic organization is to get a face in it.

Sorry I can't be more help, but good luck.
posted by cschneid at 9:29 PM on November 19, 2006

I'd pay it. I'd now know what I did was wrong and fully admit it. It's like I'm talking to the officer that pulled me over and admitting I sped.
posted by vanoakenfold at 9:29 PM on November 19, 2006

I think your willingness to admit your mistake and pony up is a good start.

Do you have an auditor or case manager? I think they'd be a good place to start.
posted by Pollomacho at 9:48 PM on November 19, 2006

Write them an I'm so sorry letter. Tell them you screwed up and that it was an honest mistake you won't make again. Tell them the circumstances, and back it up with documents if you have any. Then ask them to forgive the penalties. I have done this many times on behalf of my clients and never lost. They will still make you pay what you owe but will almost always forgive the penalties.
posted by kgn2507 at 9:49 PM on November 19, 2006

This one is for a lawyer. He or she will have a good idea where the settlement sweet spot is. Let him or her do the negotiation. You will settle for less.
posted by Ironmouth at 1:06 AM on November 20, 2006

I think the general idea behind the negotiation is that the more you can pay and the faster you can pay immediately, the less and less they'll go after penalties. But make sure the agreement is binding before cutting any checks.
posted by cowbellemoo at 1:19 AM on November 20, 2006

Either a lawyer (a tax lawyer), an enrolled agent, or an accountant would know how to approach them. Look up Offers in Compromise at http://www.irs.gov as a start.

The most important rule is one that will probably not bother you, but it is a stumbling block for some people:

The new IRC 7122(c)(1)(A) subsection requires that a taxpayer filing a “lump sum” offer must pay 20 percent of the offer amount with the application. A “lump-sum” offer means any offer of payments made in five or less installments.

posted by megatherium at 4:43 AM on November 20, 2006

Look in the phone book under United States. Find the closest IRS office. Go in person, with complete documentation, and ability to make payment #1 of 20%, at the very least. Be polite & respectful and simply ask if they can help you get the penalties reduced.
posted by theora55 at 10:57 AM on November 20, 2006

I don't think you need a lawyer, you need an accountant. They know how to approach the IRS, how to write such an "I'm sorry" letter, and try to make it sound better than just 'oops, my bad.'
posted by CwgrlUp at 6:16 PM on November 20, 2006