The Internal Revenue Service (IRS) is empowered to collect duly owed taxes from U.S. persons. As most know, the IRS readily applies penalties on taxes that are not paid properly. Taking a deeper look into IRS penalties may help you avoid them in the future.
Usually, the first notice of a penalty from the IRS is a letter in the mail. The IRS will not connect with you via email or social media. The IRS assesses penalties for several reasons which can include failure to file an accurate return and pay due taxes on time, in full, and through the correct process. It is critical to understand that some penalties can be charged monthly and interest may be charged as well. A lack of understanding of penalties and interest can ultimately land you with a far higher tax bill than you started with.
According to the IRS, below are some of the penalties you can be assessed:
- Underpayment of estimated taxes by individual or corporations: This penalty will be applied if your company, or as an individual, your estimated taxes are not paid correctly or on time.
- Penalties for tax preparers: If you are a tax preparer, it may not surprise you to learn that you can be penalized for misconduct when preparing tax returns (not to mention if you engage in tax fraud while you are at it).
- Employment tax penalties: For companies and individuals responsible for collecting and depositing payroll taxes, there are penalties assessed if the company payment is not accurate or is not on time.
- Penalties for information returns: If you fail to file an information return, or do not provide requested information or a payee statement accurately by the due date, you can be assessed a penalty.
- Penalties for excessive credit or refund: A penalty will be assessed if the IRS finds that you claimed a refund or a tax credit on your income tax that is excessive and without “reasonable cause.”
- Penalties related to accuracy: If you claim less income on your return than the IRS can document you earned, or when you claim deductions or tax credits that are essentially fraudulent because you do not qualify, you can be assessed a penalty.
- Failure to file: Failure to file your tax return on time or failure to pay due taxes on time are both opportunities to earn a penalty assessment from the IRS.
Any of these penalties and associated applied interest can become a financial burden. If you have concerns about a penalty assessment or you just received a notice from the IRS, read it carefully to learn how you can challenge the assessment, or call the IRS for more information. When you have questions and the penalty is significant, speak with an experienced tax attorney before you respond to the IRS.
Tax questions or tax controversy? Our tax attorneys can help
From offices in Cleveland and Chicago, our tax group is focused on civil and criminal defense of those pursued by the IRS or who are already facing allegations. When you have tax questions, call 440-250-9709 or contact us online today.
