All About IRS Penalties and Interest
You have not filed your taxes for a long time and you need to pay back taxes. These IRS problems can bring stress to your life. Interest and penalties are also accruing. This and other IRS issues can be solved with the help of our firm.
The IRS will add interest and penalties to a late tax return with an amount due and back taxes. You may also receive a penalty if you fail to file the correct tax form. Late taxpayers are punished by penalties added automatically.
Types of Penalties
- Accuracy � 20% penalty added to your bill for understated income on your return
- Fraud. For omitting or underreporting income you’ll need to pay 75% of the amount you underreported or if you fraudulently failed to file a return you’ll pay 15% for every month you do not file up to five months, i.e., 75%.
- Failure to File Penalty. If you filed late you will pay five per cent each month up to twenty-five per cent.
- Failure to Pay Penalty. If you failed to pay on time you will pay 0.25% to 1% each month of the amount you failed to pay.
- Combined. If you file late and pay late the penalty is 5% per month.
Filing an extension will give you more time to prepare your tax return and reduce, even eliminate your Failure to File Penalty.
No penalties will be charged if you filed late and have a refund coming since penalties are calculated from the amount due.
Interest Facts
If you have tax debt, it is considered as borrowed money from the U.S., so interest will be computed, with penalties. Set by Congress, the interest rate formula is adjusted every quarter and compounded on a daily basis, and may range from four per cent to 10% a year.
You can get interest abated from your tax bill if interest was charged due to an IRS error or if any of these occur:
- IRS delays.
- an Offer in Compromise will decrease your bill if determined that you won’t be able to pay the tax and interest.
- tax and penalties were abated, so interest is cancelled.
- filing for bankruptcy, your last option.
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