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.
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.
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You can get some relief from back taxes owed by negotiating a reduction in tax debts with the IRS or an agreement to extend the duration to pay off the tax.
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Find out about wage garnishment and how they can be used by the IRS to recover tax debts.
Offer In Compromise
Taxpayers who satisfy certain criteria may receive an offer in compromise or tax reduction from the IRS on their tax liability.
A tax penalty will be payable to the IRS if you file late or make a late payment for tax you owe.
Interest on Tax Owed
The IRS will charge interest on the amount owed for the period that the tax debt is outstanding.
Filing A Late Tax Return
If you file a late tax return there will be IRS tax penalties and interest on unpaid taxes.
The unfiled taxes will be calculated and charged to you by the IRS.