Can One Use Lawful Money To Fight IRS Penalties From The Past
No, all penalties, fines and back-taxes prior to redeeming in lawful money are still owed.
Case in point, John Schlabach attempted to filed amended tax returns for the tax years 2008-2010 and 2012 despite only redeeming lawful money starting in 2013. His additional $5000 penalties in 2015 and 2016 came from further argument of the original 2009, 2010 and 2012 penalties. A penalty was not assessed for 2008 as 10 years had passed IRS' statute of limitation in January of 2018 when an IRS agent processed that amended return. To wit, the IRS applied his lawful money claims in 2015 and 2016 to his prior penalties proving that lawful money is always honored by the IRS. The IRS denied the claims for tax years 2008-2012 specifically through the simple logic of: 'If the person claimed lawful money in those years then the returns would not require corrections - it is therefore late.' The IRS never addressed the 2013 refund owed because the return requested withholdings + $10,000 in penalties be refunded. The return is rightfully denied as it currently stands. There were no penalties assessed by the IRS for the tax years 2013-2016 (when John had proof of lawful money redemption).