The IRS charges monthly penalties and interest on unpaid tax debts held by taxpayers. This is done to increase compliance of US tax laws. Penalties for late-filing may be abated if taxpayers have a reasonable cause for their failure to pay taxes on time. IRS Tax Attorney Network discusses the various types of IRS penalties, and how taxpayers can minimize the IRS penalties and interest on their tax debt.
Different Kinds of Penalties and Interest
There are various kinds of IRS penalties and interest that taxpayers face for various non-conformities to federal tax laws. Tax debt, tax fraud, tax evasion and tax avoidance are some of the cases in which the IRS charges penalties and interest. IRS Tax Attorney Network informs taxpayers of the most common kinds of penalties they may face when they file or pay their taxes late.
Not filing taxes by the deadline may result in a failure-to-file penalty. If taxpayers do not pay their tax liability by the due date, they may face a failure-to-pay penalty. The failure-to-file penalty is more than the failure-to-pay penalty. Therefore, IRS Tax Attorney Network suggests taxpayers file their tax return even if they cannot pay the taxes they owe. They may pay as much as they can and explore various IRS debt payment programs to settle the remainder.
The penalty for filing taxes late is usually five percent of the unpaid tax amount for each month the taxes remain unpaid.IRS Tax Attorney Network informs taxpayers that this penalty does not go beyond 25 percent of the unpaid taxes.
When tax returns are filed after more than 60 days from the due date or the extended due date, taxpayers will need to pay $135 or 100 percent of the unpaid taxes, whichever is smaller.
In cases of non-payment, the IRS will charge a failure-to-pay penalty of half to one percent of the unpaid taxes for each month after the due date that the taxes were not paid. IRS Tax Attorney Network mentions that this penalty can go up to 25 percent of unpaid taxes but not over.
Rising Penalties and Interest & Their Resolution
Any amount of tax that a taxpayer is legally required to pay to the government which has not been paid is charged interest. IRS Tax Attorney Network mentions that it is penalties and interest that increase the overall amount of the tax debt.
Penalties and interest will continue to accrue as time passes by. Therefore, IRS Tax Attorney Network suggests taxpayers to pay off their tax debt at the earliest to save money in penalties and interest.
Most American taxpayers find themselves facing penalties and interest charged upon unpaid tax debt. For whatever reason taxpayers did not file their taxes, the IRS slaps penalties onto the tax debt. Taxpayers can file for a Penalty Abatement if there was an unavoidable cause, not willful neglect, which led to the delay in filing taxes or the failure to file taxes for a particular year.
Penalties and interest can be avoided by taxpayers by filing and paying taxes accurately and on time. If a taxpayer is unable to file or pay their taxes on time for a particular year, they can file for a Penalty Abatement. Taxpayers need to explore their debt payment options to minimize IRS penalties and interest.
For help finding a trusted tax professional visit IRS Tax Attorney Network