IRS Penalties

IRS Penalties are nothing to overlook. Overlooking them can cost you a small fortune, in fact. These penalties are accessed based on the amount of money that is owed to the government. If you owe the Internal Revenue Service money, such as on your income tax return, penalties can be assessed on that amount owed and interest can be placed on it. In fact, what you may not know is that the IRS can also owe you money and have to pay you interest if there is some reason that your refund is not funded accordingly and is delayed beyond a specific amount of time.

Will You Owe Money?

Anyone that is considering whether or not they need to pay these fees needs to realize just what the three largest IRS penalties are so that they can work to avoid them.

1. Failure to File Penalty: If you do not file your tax return on time, you are likely to be charged with this penalty. The calculation for how much this penalty is can be quite costly at 5 percent for each month that the tax is late on the total amount of tax that is due to be paid. There is a maximum that can be paid of 25 percent. In short, simply multiply the number of months late your return is by 5 percent to learn this fee to you.

2. Failure to Pay Penalty: If you do file your tax return but you do not make payment of the taxes that are due, the IRS penalties lie here as well. Now, you have a tax that is charged at 5 percent for every month that the tax is not paid in full. There is no maximum amount in this situation, though. The original deadline to make payment (April 15th most years) is used to calculate the first date that the payment was due.

3. Interest Penalties: Another penalty that will need to be paid is that of interest. Interest is calculated on how much money you owe in tax. This amount of interest will change every three months as the interest rate fluctuates. Underpayment of tax can be costly and since the interest is calculated for every day that your balance is not paid in full, this is a very costly situation to be in.

To avoid IRS penalties, take the time to make sure that your tax bill is paid on time and in full. Otherwise, these costly mistakes could cause you to pay much more in tax than you had to pay originally.

IRS Penalties |