What are the penalties and interest? Can they be avoided? In 1989, the IRS revamped its tax penalty system. Before the reform, more than 150 overlapping tax penalties existed. Consequently, a single infraction could result in multiple tax penalties. Below are the current tax penalties for various infractions. Infraction: Penalty Late Filing (If the tax return is more than 60 days late, the minimum penalty is the smaller of $100 or 100% of the tax owed.) 5% per month of the net tax due (maximum 25%) Late filing due to fraud 15% per month of the net tax due (maximum 75%) Late tax payments 0.5% per month of the unpaid tax due (maximum 25%) The 0.5% rate increases to 1% after the IRS issues a notice of intent to levy. Negligence or disregard of tax rules and regulations 20% of tax underpayment Fraud 75% of tax underpayment Substantial understatements of income tax (tax underpayments that exceed the greater of 10% of the correct tax liability or $5,000) 20%...
Nicholas Hartney, EA provides a valuable, cost-effective, professional and friendly tax representation service for all taxpayers who are ready to have their tax problems resolved.