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Common IRS Civil Tax Penalties

Common IRS Civil Tax Penalties

Many IRS tax penalties are assessed automatically if you fail to submit payment or file a tax return on time. These penalties may also continue to accrue each month until you pay your taxes or file your return.

The following are some of the most common IRS civil tax penalties:

Failure to File Penalty

The failure to file penalty is 5% of your unpaid taxes due per month. If you are due a refund and don’t file, you won’t be charged this penalty.

You can also avoid this penalty for six months by requesting a tax filing extension. However, you may still be charged the failure to pay penalty, even if you receive a filing extension.

Failure to Pay Penalty

The failure to pay penalty is 0.5% of the unpaid taxes per month. If you also haven’t filed your tax return, the combined penalties are limited to 5% per month.

On top of tax penalties, you’ll also owe interest on your unpaid taxes. IRS interest rates are adjusted each quarter.

Underpayment Penalties

Underpayment penalties are charged when you don’t pay enough in taxes throughout the year. These penalties are usually charged to self-employed taxpayers who don’t pay enough in estimated taxes.

The amount of your underpayment penalties will vary depending on how late your payments are and how much you underpaid. You can avoid these penalties by meeting one of the safe-harbor conditions for estimated tax payments.

Accuracy-Related Penalty

The accuracy-related penalty is charged when your return contains inaccurate information. You may be assessed this penalty if an IRS audit results in an adjustment to your return.

The accuracy-related penalty is normally 20% of the understated taxes, but it can be increased to 40% for certain gross understatements.

Civil Tax Fraud Penalty

If a tax understatement was caused by intentional conduct, rather than a mistake, the civil tax fraud penalty can be assessed. Unlike the other tax penalties listed, the tax fraud penalty requires the IRS to show that the taxpayer intentionally violated tax laws.

The civil tax fraud penalty is 75% of the understated taxes. Criminal tax fraud penalties can also be assessed, but are much less common.

Some tax penalties can be eliminated using IRS penalty abatement options. Contact a tax attorney to discuss tax penalty relief.

The Gartzman Law Firm can help you with penalty relief and other tax resolution strategies. Use our contact form to request a consultation with an Atlanta tax resolution attorney.