IRS Tax penaltiesÂ are generally defined as fines and interest the IRS may assess on taxpayers for committing errors, failing to file on time, failing to file appropriately or failing to pay for tax debts in full. There are a number of reasons why the IRS will assess penalties on taxpayers and the most common reasons are listed below.
Failure to File. The IRS may assess tax penalties for failing to file. If you fail to file taxes on the date they are due, the IRS can assess a tax penalty of 5.00% per month for taxes owed. However, there are limits. Typically, your tax penalties cannot exceed more than 25.00% of your overall tax debt. If there are extenuating circumstances that you can show the IRS that made it impossible to file on time, they may not assess the Failure to File penalties.
If you owe taxes, the Internal Revenue Service will calculate penalties and interest on the amount owed. If you have a refund, the IRS may pay you interest on the delayed refund. (Note the difference between “will” and “may” â€“ the IRS generally pays interest on refunds that have been delayed because of slow processing by the IRS. Since most late tax returns take longer to process, the IRS “may” pay you interest based on the extra amount of time it takes them to process your return.) If you have a refund, there is no penalties for filing late.Â Tax Penalties are calculated on the amount due. Since there is no amount due, there is no tax penalties.
Late-payment tax penalties. You will have to pay a failure-to-pay tax penalties of 0.50% of your unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. If you filed for an extension, please note that the extension is only for filing, not paying. You will not be penalized during the automatic six-month extension if you paid at least 90% of your actual tax liability on or before the due date of your return, and pay the balance when you file the return.
Filing and paying late. If you experience both late filing and late payment in any given month, the failure-to-file tax penalties are reduced by the failure-to-pay tax penalties. If you are more than 60 days late in filing and paying, the minimum penalties is the smaller of $135 or 100% of the remaining tax owed at the time of filing.
How can I Avoid Tax Penalties?
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