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What To Know About Tax Penalties


Taxpayers who can’t meet their tax obligations could end up owing a penalty to the IRS. Fortunately, taxpayers can avoid this by entering into a payment plan or installment agreement and paying their debt off over time. To learn more about how to avoid incurring hefty tax penalties, reach out to our legal team today.

Why You May be Charged a Penalty by the IRS

A taxpayer can incur IRS penalties for a number of reasons, but most are assigned because a taxpayer failed to:

  • File a tax return on time;
  • Pay a tax owed to the IRS;
  • Claim all of his or her income or to properly claim deductions and credits;
  • Properly file or provide an information return or payee statement by the due date;
  • Pay employment taxes accurately or on time;
  • Pay estimated taxes accurately or on time; or
  • Report foreign sourced financial activity correctly.

The IRS also charges interest on penalties every month if a taxpayer fails to pay the full amount of the tax they owe. The date from which the IRS begins to charge interest will vary depending on the type of penalty. All taxpayers who owe a tax debt can, however, expect interest charges to increase the amount they owe until the balance is paid in full.

How to Know Whether You Owe a Penalty

A taxpayer who has been charged a penalty should receive a notice by mail notifying him or her of the charge. This notice will give details about the penalty, including a special identification number, the reason for the charge, and what the taxpayer can do next to address the problem at hand. Taxpayers who can quickly resolve the issues explained in their letters can avoid the accrual of additional penalties.

Reducing or Removing a Penalty

It is possible for some taxpayers to remove or reduce certain tax penalties if they can prove that they:

  • Acted in good faith; and
  • Had reasonable cause for failing to meet their tax obligations.

Taxpayers can also dispute a penalty assessed by the IRS if they disagree with the amount allegedly owed. Those who choose to go this route will need to sign and send an explanatory letter to the agency, as well as supporting documentation.

Avoiding Penalties

Removing or reducing a penalty can be difficult, so taxpayers are encouraged to avoid their assessment entirely by filing accurate returns, paying taxes before the due date, and providing information returns properly and on time. Taxpayers who are unable to take these steps can still avoid significant penalties by applying for an extension to file or negotiating a payment plan.

Have You Been Charged a Penalty by the IRS?

If you recently received notice that you are being charged a penalty by the IRS, you have a few different options going forward, including entering into a payment plan, requesting an extension, or disputing the penalty. To find out which of these options is best for you, call Florida unfiled tax lawyer, CPA, and former FBI Special Agent Ronald Cutler, P.A. at 386-490-9949 today.