Tom's Tax Tip

[yesthattom]

If you receive a letter from the IRS that says you messed up and you have to pay $A plus a fine of $B for making the mistake, just send them a check for $A. They won't come after you for the $B.

Why?

Because many years ago someone did that and took it to tax court. He said, "Do I owe you $A now?" the IRS said, "No" and he replied, "Well then I certainly don't owe you a fine, do I?"

The judge upheld it. It's been true ever since.

(Obviously, ask you tax advisor before doing this.)

(And, no, I didn't receive any such letter.)

Comments

[sfo2lhr.livejournal.com]

I'm skeptical and would like to try to chase down the story/facts as well.

As a practical matter, the IRS freely waives penalties, interest, and even part of the tax liability itself, just like any creditor, in order to try to settle cases and get some cents on the dollar. And Tax Court judges are equally liberal in reducing liabilities. But I would need to be convinced by case law that this is legally required somehow under the tax code or regulations.

[yesthattom.livejournal.com]

A number of years ago I sat in Borders and read the first 2-3 chapters of this book which made the claim.

A few years later when helping a non-profit dig out of a financial disaster, I saw they had paid $1,000 in IRS fines for late filing and someone ELSE made the comment that they shouldn't have paid the $1,000. The (then) president was very inexperienced and had just paniced and sent a check for the full amount. Everyone helping the non-profit dig out was like, "Oh, dear! you [polite word for idiot]! You shouldn't have sent the full amount!"