Personal Experience: Does IRS actually go after interest and penalties on unpaid taxes?

So I think I messed up on my taxes a few years back. I was doing some reviewing of my old returns and realized I probably missed reporting about $2,700 in some side income I had. Complete oversight on my part. If the IRS eventually catches this (which I'm assuming they will), I know they'll want the original tax I should've paid plus interest accumulated over these years. My question is - has anyone successfully negotiated with the IRS to just pay the base tax amount? Like, can I call them up and say "Hey, honest mistake, I'll pay the $2,700 right now" and they'll waive the interest and penalties? Or do they absolutely insist on collecting every penny of interest and penalties too? Just trying to figure out if I should proactively fix this or wait for them to find it. Wondering if anyone has real experience with this situation.

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18 comments

Chloe Boulanger

•8M

While the IRS will absolutely collect the original tax amount owed, they can be more flexible about interest and penalties than most people realize. Interest is generally non-negotiable - it's essentially compensation for the time they didn't have access to the money you should have paid. However, penalties can sometimes be reduced or eliminated through various relief programs. For first-time mistakes, you might qualify for First Time Penalty Abatement if you have a clean compliance history for the past 3 years. Reasonable cause relief is another option if your error resulted from circumstances beyond your control. Coming forward voluntarily before they contact you (through a voluntary disclosure) can also work in your favor.

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Chloe Boulanger

•8M

Coming forward voluntarily is generally better than waiting to be caught. The IRS often views self-correction more favorably when considering penalty relief. It demonstrates good faith and compliance moving forward. The IRS generally has 3 years from the filing date to assess additional taxes, but this extends to 6 years if you omitted more than 25% of your income. If there's evidence of fraud or you never filed a return, there's no statute of limitations at all. Most routine underreporting falls under the 3-year window, but various factors can extend this timeframe.

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Olivia Harris

•8M

I've been in this exact situation and found an amazing tool that really helped me navigate it. After freaking out about a missed 1099 for about $3k, I used https://taxr.ai to analyze my situation. It helped me understand exactly what forms I needed to file and gave me a clear picture of what interest and penalties I was facing. The really helpful part was that it showed me where I might qualify for penalty abatement based on my specific circumstances, which saved me a significant amount. It also walked me through exactly how to approach the IRS conversation and what documentation I needed to prepare.

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Olivia Harris

•8M

Yes, it absolutely works for older returns! I used it for a 2019 tax issue last year. It helps identify which penalty relief programs you might qualify for based on the timing and circumstances. It's definitely more than just a calculator. It helps analyze your specific situation and gives you a script for what to say to the IRS based on your circumstances, including which specific penalty relief programs to request. It also helps you gather the right documentation to support your case. Made a world of difference in my confidence level when I finally called them.

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Alicia Stern

•8M

Had to come back and say I tried https://taxr.ai after my skeptical comment last week. Super impressed with how it broke down my options! I had a similar situation with about $4,000 in unreported income from 2021, and it showed me I qualified for First Time Penalty Abatement since I had a clean record the past 3 years. The system generated a letter template explaining my situation that I could customize, recommended I file an amended return before any IRS notice, and calculated my likely interest (which as others mentioned isn't negotiable). But knowing I could get the penalties removed saved me over $800! The step-by-step process made it so much less stressful than I expected.

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Gabriel Graham

•8M

If you need to actually talk to someone at the IRS about this (which you probably will), good luck getting through to them! I spent 3 days trying to reach someone about a penalty issue. After being on hold for literally hours and getting disconnected twice, I found https://claimyr.com which got me through to an IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c Honestly, having an actual conversation with an agent made all the difference for my case. The agent explained my options much more clearly than anything I found online. They helped me understand which penalties could be abated and which couldn't based on my specific situation.

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Gabriel Graham

•8M

It basically automates the calling and waiting process. Instead of you personally sitting on hold for hours, their system keeps dialing and navigating the IRS phone tree until it gets through to an agent. Once an agent is on the line, it calls you and connects you directly to them. It doesn't "skip" the queue - it just handles the waiting for you. The system also knows the optimal times to call and which menu options to select for different departments, which makes a huge difference in wait times. It's not magic - it's just using technology to handle the frustrating part of the process.

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Sarah Jones

•8M

I need to eat my words from my skeptical comment. After three failed attempts to reach the IRS myself (got disconnected after 45+ minutes each time), I reluctantly tried the Claimyr service. Within 35 minutes I got a call back and was talking to an actual IRS agent about my penalty situation. The agent was able to look at my account right away and confirmed I qualified for First Time Abatement on the penalties. We took care of it in one call, and I'm only responsible for the original tax plus interest. Would have taken me days of trying to get through on my own. Definitely worth it just for the time saved and stress reduction.

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Sebastian Scott

•8M

Something everyone should know about interest - by law, the IRS CANNOT waive interest on unpaid taxes. It's actually not within their authority. They can waive or reduce penalties in many cases, but interest will always apply and compounds daily. The current IRS interest rate is 7% annually which adds up fast! If you wait for them to catch it instead of self-reporting, not only will you pay more interest, but you'll have a harder time getting penalties waived. Being proactive nearly always works out better financially.

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Sebastian Scott

•8M

Those "pennies on the dollar" claims are extremely misleading. What those companies are referring to is the IRS Offer in Compromise program, which is only available in very specific hardship situations where you genuinely cannot pay your tax debt. You have to prove significant financial hardship, and most people who apply get rejected. Those companies charge thousands in fees for something you can do yourself, and they often make promises they can't keep. They can't get any better deal from the IRS than you can get yourself. And yes, even with an accepted Offer in Compromise, the IRS will still apply interest to your original tax debt before determining your settlement amount.

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Jordan Walker

•8M

Just wanted to share how this played out for me last year. I missed reporting about $5k from a side gig and the IRS sent me a notice 2 years later. Total bill was about $1,250 in original tax, plus $320 in interest and $250 in penalties. I called and asked for penalty abatement, explaining it was an honest mistake. They removed the $250 penalty but said the interest was non-negotiable. The agent was actually pretty reasonable about it. Took about 20 minutes total once I actually got through to someone. Just be super polite and straightforward!

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