Question:

    I didn’t file my tax returns for a few years, but recently I did file them.  I did not owe very much in income tax as shown on my return, but I received a notice from the IRS that they are also charging me a lot of penalties and interest for not paying on time.  If I pay off the tax in full will the IRS not charge me the penalties and interest?

Answer:

    This is an interesting question because as I look at many people’s IRS situation, the penalty and interest column is often as much as the tax that was originally due.  Unfortunately, the IRS will not negotiate with regards to the interest they have assessed unless they have done something incorrectly or improper, and that does happen on occasion. 

    They will abate penalties on occasion if the taxpayer has "reasonable cause" for failing to file, failing to pay, or whatever the penalty is for.  "Reasonable Cause" is sort of amorphous and cannot be clearly defined.  Most often, the IRS defines "reasonable cause" by what it is not, such as not having the money to pay the tax is not reasonable cause for not filing and paying your tax returns. 

    So if you don’t have reasonable cause and cannot get the IRS to abate any of your penalties, you will unfortunately be stuck with the total bill.