What Is an IRS Penalty?

The IRS has outlined tax penalties in the Internal Revenue Code. These IRS penalties are supposed to encourage "voluntary compliance" from taxpayers. The IRS has over one-hundred and forty different federal tax penalties. IRS penalties can be assessed for a wide variety of issues including; tax fraud, accuracy related penalties, late filing penalties, late payment penalties, failing to pay a tax, and filing a frivolous return. These IRS penalties can be quite costly. If you have any question about what an IRS penalty is and if it applies to you, then you definitely need to get help from a tax attorney.

Fraud penalties

As mentioned previously, a fraudulent return penalty is related to someone failing to report income or underpaying their income tax. These actions constitute fraud in every state and if caught, the fine is quite severe. The IRS underpayment penalty is 75% of the under paid tax amount and the penalty also has a 75% maximum rate. This is a very serious and costly IRS penalty and if you have questions, ask your tax specialist because they know the laws and codes.

Accuracy penalties

The accuracy-related penalty is related to personal or income information being incorrect. This impedes the efforts of the IRS to process the return and this conduct will be severely penalized and enforced. If you omit a social security number or use a fake number, you are committing a serious error and it will cause the IRS to come after you with great fervor. You will end up owing an IRS penalty for not filing a truthful statement on your income tax return.

The importance of dotting your I's and crossing your T's

As you can see it is very important to file an accurate tax return in a timely manner. You can incur an IRS penalty for any number or reasons, if you find this to be the case then consult with a tax specialist to find out what your options are. There are many inclusions in the tax codes that may limit your liability in certain circumstances. You may be able to prove a case for an exception to your fines and penalties, in which case you may be able to have your penalties lessened or even erased totally. Your tax professional will review your tax returns and determine if any of these conditions are optional for your case.

Information for self-employed individuals

If you believe you are going to owe more taxes the following year then you have two options. If you are self-employed or expect your investment earnings to be minor, then provide your tax specialist with a new W-4. If you allow for extra with-holdings then you may withhold more taxes from your paycheck. If this is not a viable option for you then you can also begin making "estimated tax payments". This is done by having you tax specialist file a form called a 1040-ES. You can begin making quarterly estimated tax payments and hopefully this will offset IRS underpayment penalties that might be encountered. Either way if you owe an IRS penalty, your tax specialist can go over what options will work best for you.

We will always fight for your rights

You can avoid paying an IRS penalty if you remain in voluntary compliance with the IRS. You can work through any existing IRS penalties with the assistance of a tax specialist, they are there at your disposal and can gladly provide you with the information and guidance you need to navigate through your tax problems. No matter what your situation is with the IRS, you do have options. You should never ignore problems because they won't go away. Consult with your tax professional and allow them to work through your tax situation and find a workable solution for you.