Tax Penalties - IRS Tax Penalties and You

The Internal Revenue Service (IRS) charge a variety of tax penalties as a deterrent to ensure taxpayers remain in compliance with tax law. Typically, the severity of tax penalties assessed depends on the violation at stake. Tax penalties are generally assessed by computers, that don’t understand the circumstances that led up to the taxpayer's IRS problem. There are many situations where tax penalties can be removed if it can be shown that there was “reasonable cause”.



IRS Lawyers - IRS Tax Penalties - IRS Relief

Dealing with IRS tax penalties involves navigating the complicated maze of U.S. tax law. IRS tax relief lawyers have the knowledge of tax law and expertise needed to negotiate with the IRS on your behalf to reduce your tax debt, your tax penalties and resolve your IRS tax debt.


Unfiled Tax Returns with No Taxes Owed

If you or your business does not owe taxes, it is still in your best interests to file your tax returns. There are no penalties that are added if the taxpayer does not owe taxes but there are other possible consequences and sometimes tax penalties. If a taxpayer is owed a refund, the refund cannot be claimed until a tax return is filed. If three years have passed since the due date of the tax return, the IRS is no longer required to pay the taxpayer the refund. If the IRS believes that the taxpayer owes extra money (even if they do not), they will file a “substitute for return”. The IRS will use the information they have on hand to file the tax return and may leave off certain tax deductions or tax credits that the taxpayer would normally claim or deduct. Therefore, if the IRS does complete a substitute for return, in many cases the IRS will come up with a tax balance owed and add on additional penalties.

Unfiled Taxes with Taxes Owed

The IRS charges some of the harshest penalties for taxpayers that owe taxes and either do not file or who file their tax returns late. The tax penalties that are charged is called the failure-to-file penalty. These tax penalties are charged at a rate of 5% for each month or part of the month that the tax return remains unfiled and unpaid. The maximum tax penalties that can be charged is 25% of the tax liability. If the tax return is over 60 days late the minimum penalty will be the lesser of $135 or 100% of the tax liability.

If the taxpayer does not take the initiative to file a tax return the IRS will eventually file a substitute for return on their behalf in order to assess a tax liability, begin charging tax penalties and enforce collection action.

If it can be proven that the failure to file was willful or fraudulent the IRS may charge civil tax penalties. The civil tax penalties are charged at a rate of 15% a month with a maximum of 75% of the tax amount owed. In rare circumstances, the IRS has the right to charge criminal penalties to those taxpayers who willfully fail to file or pay their taxes on time. If the taxpayer is found guilty, they can be fined $25,000 and sentenced to one year in prison (rare).

Tax Penalties for Filed but Unpaid Taxes

The IRS charges penalties at a much lower rate if taxes are filed and not paid vs. taxes being unfiled and not paid. The penalty for unpaid taxes is called the failure-to-pay penalty. The failure-to-pay penalty is charged at a rate of .5% for each month that the tax remains unpaid after the tax filing due date. The maximum penalty that can be charged is 25% of the tax liability.


Interest Charged on Unpaid Taxes

In addition to tax penalties, the IRS also charges interest on unpaid tax liabilities. The interest that the IRS charges is determined by the federal short-term rate, which changes quarterly. They charge the federal short-term rate plus 3%. Currently, as of Q4 2015 the interest rate the IRS is charging is 3% for underpayments for individual taxpayers.

Getting Help With IRS Tax Penalties

Every taxpayer’s situation is unique, depending upon the type of taxpayer (business or individual) and their financial situation. There are situations where a taxpayer’s tax penalties can be dropped significantly or even completely eliminated. Our Tax Lawyers, at Flat Fee Tax Service, Inc., will do an in-depth analysis of your situation to determine the best tax relief strategy for you. Below are some possible services we can offer you to help with your tax penalties.

File unfiled returns

If you have unfiled tax returns our tax relief team will file these as soon as possible to minimize your tax penalties while ensuring you get the maximum tax deductions. By filing your non-file tax returns, we can reduce the Substitute for Returns.

Amend your tax returns

If the IRS filed a substitute for return on you or we notice errors with a prior tax filing our Tax Lawyers will file an amended tax return in order to minimize the tax amount owed as well as reduce the tax penalties that were charged.

Consider an IRS Penalty Abatement

The IRS generally will give you one year of penalty abatement starting with the first year you became uncompliant. Beyond the 1 year, we will determine if you have “reasonable cause,” or valid reasons for not staying in compliance. If you do have valid reasons, additional years of tax penalties could be abated.

Consider tax forgiveness - Offer in Compromise

If you cannot pay the total amount of tax debt owed in full, we will determine the best possible IRS settlement for your unique situation. You may very well be eligible and qualified for tax forgiveness through the Offer in Compromise program. A successful Offer in Compromise will wipe out both the tax penalties and the interest added to your tax debt.



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Flat Fee Tax Service

3200 4th Ave., Suite 208,

San Diego, CA 92103

Phone. 800-589-3078