What can I do to correct income tax errors when the original income tax was completed and sent by an agency without my approval?

There are several issues to deal with.

First, I would suggest filing amended tax returns for 2005 and 2006 to address the incorrect information reported. The IRS will assess these returns and calculate additional penalties and interest to the balance. It will take roughly 8-10 weeks for the IRS to process these returns. Once the correct balance is assessed, you can proceed with a resolution (Full pay, Installment Agremeent, Offer in Compromise, etc). Please note that you will probably owe both on your Tax Return and the money received (if any) from any refund.

Second, with regards to the penalties and interest calculated on 2005 and 2006. A penalty abatement petition may be a good option for you. You will have to prove that there was "resonable cause" which is demonstrated when you use "ordinary business care and prudence" in determining your tax obligation. You may be able to have the penalties reduced or eliminated. Remember to support this petition with documentation regarding the agency who submitted your Tax Returns without your permission.