What You Need to Know About an IRS Tax Penalty
Every year working people know the drill about filing an income tax return. Whether you owe money or are due a refund, you are still responsible for filing a tax return and complying with the tax codes and laws. Some people file their own tax returns while some people will retain the assistance of a tax professional to file their yearly income tax returns for them. If you find that you are in a position to owe an IRS tax penalty, then if you don’t already have tax professional then you definitely need to get one.
IRS tax penalties: What you do not know can cost you!
An IRS tax penalty can seem like a very intimidating situation, but you can find out if you are eligible for hardship considerations. This can mean the difference between owing possibly thousands of dollars and maybe being able to have the tax penalty forgiven or reduced. If you are not sure where to begin, then talk to your tax professional and explain the situation. Once they know what is going on, they can apprise you of your options and responsibilities.
If you owe back taxes to the government, the IRS will assist you an IRS tax penalty and figure in the interest on the amount as well. However, it is very simple if you do not owe any money then there is no fine. There are three types of penalties: failure-to-file, failure-to-pay and interest. The differences between the fines are something that your tax professional can explain to you in detail. IRS penalties are calculated quite differently so if you are unsure then don’t worry your tax professional will also know about the process and take care of it for you.
How penalties are assessed
If you find yourself in a position of owing an IRS late tax penalty, then it is best to take care of it as quickly as possible. Your tax professional will help you and will gather all the information you need. If you are the subject of a failure-to-file penalty, this fine is calculated from the deadline date of the tax return. It is 5% per month that the tax return is late and this IRS late filing penalty has a maximum of 25% of the balance due to the IRS.
A failure-to-pay penalty is calculated upon the amount of money you owe if you have underpaid the IRS. The minimum amount of.05% is assessed for each month you owe the taxes, and will keep being added on until you pay off the fines. This amount may not appear to be much, but the longer it goes on and when factored into any other amounts you owe, you can have a large IRS tax penalty before you know it.
Interesting facts about interest rates
As for any interest you may owe, this is based on how much tax money you owe. Interest rates change quarterly and will accrue quite rapidly. Once you are given an IRS tax penalty, you can expect the amount you owe is going to fluctuate because of the interest involved. The rate of interest is added to your tax fine daily and the rate is currently at 5%, which is a yearly rate. There are lessons to be learned when dealing with the IRS interest and penalties. If you find you may need additional time in filing a tax return then, have your specialist file an extension for you. No matter what happens; if you have a tax professional on your side you are more likely to have a better outcome. They will deal with all the information and work with the IRS on your behalf and are adept at all kinds of tax situations.