Types of Penalties

The IRS relies on penalties for added revenue, as well as to deter taxpayers from missing tax payments.

Categories of Penalties

• Accuracy Penalties
• Fraud Penalties
• Failure to Pay Taxes Penalties
• Late Filing of Tax Return Penalties
• Combined Penalties

If you understated your income tax liability on your tax return, accuracy penalties will be compounded on your tax debt. The amount is twenty per cent.

Fraudulent omission or understating of your return's income is assessed with fraud penalties of seventy-five per cent.

Evaluated at 0.25% to 1% every month of the figure you did not settle on time are the failure to pay taxes penalties. This penalty begins at 0.50%. If you arrive at an installment agreement, this is decreased to 0.25% monthly. It's increased to 1% monthly if you are issued a Notice of Intent to Levy. The penalty commences on April 16 and 0.50% is accrued to your liability on the 16th day of each month.

Penalties for late filing of tax return may range from 5% to twenty-five per cent montly.

Combined penalties are just that, a combination of penalties. They add up quick if piled on top of one another.

Wrong advice from an IRS official may lead to the penalties being cancelled, but you have to show that you disclosed accurate information.

You can minimize or get rid of penalties if you can prove reasonable cause why you did not follow the tax law. This has to be done in writing.

Reasonable cause proves that you had a good reason for failing to act, whether you had medical, personal, or financial problems, as long as you behaved with "ordinary business care and prudence."

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Originally posted 2008-02-01 05:20:49. Republished by Blog Post Promoter

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