How to Stop IRS Interest Penalties With a Mediator

IRS mediation to stop interest penalties.

Dealing with interest and penalties assessed by the Internal Revenue Service is challenging. You may even feel as if you make no progress no matter how reasonable you are in your negotiations with the agency. If you feel you are at loggerheads with the IRS, engaging a mediator to attempt to negotiate a settlement may be the ideal choice for you. There are mediation services in operation today established to assist individuals and businesses in resolving IRS interest and penalty assessments.

Things You'll Need

• IRS tax notifications
• IRS tax returns and supporting materials

Instructions

1. Notify the IRS that you desire to engage in its mediation program. Information about the mediation program is available through the IRS website and its informative brochure entitled "Internal Revenue Service: Mediation Procedures," also available online.

2. Request at the time you seek IRS mediation that the agency administratively freeze the accumulation of any additional interest and penalty charges. Provided you demonstrate a desire to resolve your tax issue, and assuming you did not dodge the agency for an extended period of time, the IRS likely will agree to stop tacking on additional interest and fees during the mediation process.

3. Propose a settlement of your IRS debt (if you do agree that you owe the agency at least some taxes) that includes an elimination of interest and penalties previously assessed by the agency. The IRS generally is willing to consider an elimination of outstanding penalties if you reach a compromise with the agency in regard to paying your back taxes. The IRS tends to be less willing to eliminate accumulated interest. If you demonstrate a hardship (a health problem, for example) that prevented you from dealing with your tax obligations, the agency may agree to waive the interest that accumulated.

4. Seek agreement from the IRS to waive future interest and penalty assessments if you honor and comply with any payment plan developed in the settlement of your tax dispute through mediation. Provided you honor the commitment made to the IRS through the mediation process, the agency likely will agree with not assessing any additional penalties and possibly reducing or eliminating additional interest charges into the future.

Tips & Warnings

• Consider engaging the services of an experienced tax attorney to assist in your IRS tax matter if the agency alleges you owe a larger amount of money. Engaging an attorney tends to be economically wise if the IRS contends you owe over $10,000 in taxes with additional amounts for interest and penalties. Although the the state and local bar associations in your area cannot recommend a specific attorney to assist you, these groups do maintain directories of attorneys in different practice areas. Contact information for these organizations is available from the American Bar Association.

• Do not put off responding to a notification from the IRS about back taxes or some other issue. The agency maintains broad legal authority to impose interest and penalties, and can pursue other sanctions against you. Being as proactive as possible is the wise course for you to follow.

References

• "The Tax Advisor": IRS Alternative dispute Resolution Initiatives"; John M. Beehler; 2005
• Internal Revenue Manual: Penalty and Interest

Resources

• Internal Revenue Service: Mediation Procedures
• American Bar Association: Directory of State and Local Bar Associations