The penalties associated with a tax debtor’s federal tax obligations can be extraordinarily burdensome if not avoided by following the appropriate Internal Revenue Service (IRS) procedures for taxpayers. Keep in mind that these penalties are not set in stone, and may vary depending upon the facts of a taxpayer’s situation, and in light of a particular combination of penalties assessed to that taxpayer.
The various penalties assessed by the IRS are as follows:
- Failure-to-file penalty – 5% of taxes left unpaid, but only for failure to file.
- Failure-to-pay penalty – ½ of 1% of taxes left unpaid for failure to pay.
- Penalty for frivolous return – $500 penalty for frivolous underreporting or attempts to delay or interfere with the tax collection process.
- Accuracy penalty – 20% of unpaid taxes for substantial understatement (for individuals, 10% of correct tax or $5,000) or disregard of IRS rules.
- Negligence – unreasonable failure to comply with the IRS.
- Disregard – careless, intentional or reckless disregard of the IRS rules.
- Information reporting penalties – $15-$50 per return depending on lateness.
- Failure to furnish payee statements – $50 for unintentional failure, or the greater of $100 per statement or 10% or 5% (depending on the statement).
- Identification numbers and other information – $50 per failure.
- Filing late – 5%-25% of the amount late for each month late.
- Fraud – 15%-75% of the amount for each month the return is late.
- Return over 60 days late – the smaller of $100 or 100% of the unpaid tax.
- Paying tax late – 1/2 of 1% of unpaid taxes for each month late.
- Failure to supply social security number – $50 for each failure to provide it.
- Failure to furnish tax shelter registration number –transferors of interests in tax shelters are subject to $100 penalty for failure to provide a tax shelter registration number, and $250 penalties apply to those that fail to report a tax shelter registration number on a tax return.
- Criminal Penalties
Other particularities relating to IRS tax penalties may be relevant to a particular tax debtor’s situation, and should also be kept in mind. For example, the fraud penalty on a joint return does not apply to a spouse unless some part of the underpayment is due to the fraud of that spouse. Additionally, combined penalties may result in a lower overall penalty for each individual penalty assessed, e.g. the failure to file penalty and the late filing penalty. For more information regarding IRS penalties, discuss your tax situation with an experienced tax attorney.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.