IRS TAX PENALTIES

Understanding IRS Tax Penalties Part 1

What are some reasons the IRS may impose a tax penalty?

• NOT filing on time

• NOT paying taxes you owe on time (Filing a tax extension only extends filing the return. If you know you may owe taxes, filing an extension does not help avoid the failure to pay penalty).

• Filing an inaccurate tax return

What are some of the most common penalties the IRS charges?

• Failure to File

• Failure to Pay

• Accuracy-Related

• Erroneous Claim for Refund or credit penalty

• Failure to Deposit

• Dishonored Checks

• Underpayment of Estimated Tax Penalties

Did you know? The IRS may charge you monthly penalties.

Did you know? They charge interest on penalties.

So what can you do if you are charged a penalty and how do you know if you were charged in the first place? Those pesky IRS letters you receive in the mail is the best way to know if you were charged a penalty. You can also set up an IRS.gov online account and pull the account transcripts. The account transcript shows all the activity the IRS has done to your tax file. It is a great way to review for penalties and other factors like disallowed credits.

You can request for a penalty abatement. However, you must show reasonable cause. Some examples are: Natural Disasters, death or serious illness, inability to get tax records, system issues that delayed timely filing or payment.

Over the next few weeks we will break down the different types of penalties for you and how to go about requesting a reduction or removal.

Thanks for stopping by and reading our blog! Till next time! :)