Appealing IRS Notices: Proposed Amount Due, Interest, and Penalties

IRS notices requesting money typically have three sections- the proposed amount due, the interest, and the penalty.   All three amounts can be appealed with a notice response, but you need to know how to do it.

The amount due must be countered with evidence and explanations as to how the amounts calculated by the IRS are too high.  You may have missed some credits or deductions, so go through the year in question in detail to make sure that your information matches theirs. 

    Interest is inevitable and set up by the IRS code.  The only way to lower your interest is to pay promptly or lower your amount due. 

     Penalties are also set up by the IRS code, but they can sometimes be abated with the proper requests.  There are two ways around IRS penalties: 

• Reasonable cause, which means that you tried to comply with the law, but a natural disaster or other tragedy prevented you.  These are handled on a case-by-case basis but have been known to work. 
• First-time penalty abatement– This is a great option but only works if you have a clean, penalty-free filing history for at least 3 years, you’re current on all filings, and you have paid or in the process of paying any delinquent taxes due.   

      So, don’t pay the entire amount due on any IRS notice until you’ve looked at the items above because you may end up paying too much! 

Written by Dan Connors