Senate Will Probe Irs Penalty Structure

Nearly 42 percent of the $13.2 billion in penalties that the IRS assessed against taxpayers last year was wiped off the books after corporations and individuals challenged the levies as excessive or unnecessary.

This high reversal rate, and other aspects of the Internal Revenue Service’s byzantine penalty structure, will come under scrutiny during hearings this week by the Senate Finance Committee.

Senators will question, among other things, whether lower-income taxpayers get a fair shake when dealing with the IRS.

To the IRS, the large number of penalties wiped away each year shows that the system is working - that taxpayers can get relief if they show they made an innocent mistake, such as failing to sign a tax form.