Tax Penalties

 

The IRS will calculate tax penalties and interest on the tax owed. Penalties are calculated on the amount due. So if you are entitled to a refund there is no penalty.

 

There are three penalty charges:

 

• Filing Late Tax Return Penalty

 

The penalty for filing a late tax return is calculated from the time of the due date to the date you actually filed your tax return. If you have an extension it would be from this date.

 

The tax penalty is 5% for each month tax is owed for up to 5 months or 25%; the maximum penalty is capped at 25%.

 

• Failure to Pay Tax Penalty

 

This penalty is calculated from the standard payment deadline and is charged at 0.5% for each month the tax is not paid on the tax amount you owe.

 

There is no maximum percentage for a failure-to-pay penalty.

 

• Interest

 

Currently, the interest rate penalty due to the IRS for taxes owing is currently 4% per year. and is calculated daily on for outstanding tax.

 

 

How to Reduce or Eliminate Tax Penalties

 

One method of tax relief is to reduce the amount you owe to the IRS in penalties for late federal tax filing or late tax payments. If you haven't had tax debts owed for several years or this is your first penalty offense there is a good chance that the IRS will agree to reducing or eliminating the tax penalty.

 

A skilled tax professional will be able to assess the likelihood of success in requesting relief from a penalty.

 

 

Tax Penalty Abatement

 

Penalty abatement occurs where the penalty or interest amount is removed from a delinquent tax bill by the IRS in condition that the respective taxpayer pays off their tax bill. The penalty and interest are abated.