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Penalties for an Error on Your Tax Return

With complex and ever-changing tax laws, taxpayers are bound to make occasional mistakes on their tax returns. The penalty for these errors can vary depending on the circumstances.

You may face no penalty, or you may owe back taxes, several types of tax penalties, and interest or your unpaid taxes. 

No Penalty

Some mistakes don’t result in any tax penalties. If you made a math error or typo, the IRS may catch these errors and simply adjust your return for you.

For these types of mistakes, you generally don’t need to file an amended return.

Late Payment Penalty

If you make an error that lowers your tax liability, you will have to pay the late payment penalty. This penalty is 0.5% of your underpaid taxes per month, up to a maximum of 25% of the amount owed.

In addition, you’ll need to pay your back taxes and interest that accrues every month. 

Accuracy-Related Penalty

Negligent taxpayers can also face the accuracy-related penalty. This penalty is assessed when you didn’t put forth the necessary effort to comply with the tax laws.

The accuracy-related penalty is typically 20% of the underpaid tax. The penalty can be increased to 40% for some types of gross errors.

Civil Fraud Penalty

If your conduct rises to the level of tax fraud, you could be assessed the 75% civil tax fraud penalty. This penalty is only charged when you intentionally violated the tax laws, and the IRS has the burden of proving your intent.

The IRS will usually only assess this penalty if there is some evidence showing you purposely understated your taxes. Criminal tax penalties can also be assessed if you have committed tax evasion.

Penalty Relief

In some cases, you may be able to request relief from some tax penalties. First-time penalty abatement and penalty relief due to reasonable cause can both be used to get rid of some of your tax penalties.

You should also understand your tax resolution options if you have back taxes and can’t pay in full. Late-payment penalties and interest will continue to accrue, and the IRS may eventually pursue enforced collection actions, such as wage garnishments.

Consult a tax resolution attorney to discuss your penalty relief and tax debt repayment options.

Get help with back taxes and tax penalties by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.