All You Must Understand About the Types of Penalties

If you owe tax liability, your IRS problems are increasing. Until the debt is paid in full, penalties are continuously evaluated on the unsettled taxes. The penalties are added automatically, either by an IRS computer or by IRS personnel.

Penalties were originally intended to influence taxpayers to pay their taxes or be fined, but now the IRS relies on penalties for added revenue.

Penalties are for:

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

Accuracy penalties are evaluated on your tax bill if you downplayed your income tax liability on your return. This will be twenty per cent of your tax bill.

Fraudulent exclusion or underreporting of your tax return's income is imposed with fraud penalties of 75%.

Failure to pay taxes penalties are imposed at 0.25% to 1% monthly of the amount you didn't pay on time. This penalty begins at 0.50%. If you negotiate an installment agreement, the penalty is decreased to 0.25% monthly. If you don't settle and are served with a Notice of Intent to Levy, the penalty can raise to one per cent each month on the figure due. This penalty begins on April 16 and 0.50% is added to your bill on the 16th day of each month.

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

Combined penalties are combinations of two or more penalties and they grow quick.

If the mistake was caused by wrong written advice from an IRS official and you can prove it, the IRS will not impose penalties. Show that when you necessitated the IRS for advice, you provided accurate tax information to the IRS.

If you will show reasonable cause why you did not follow the tax law, you can eliminate or reduce penalties. This should be written.

Reasonable cause can be financial, medical, and personal problems, or anything that shows that you behaved with "ordinary business care and prudence, and a good reason for failing to act.

Darrin T. Mish is a Nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. His passion is providing IRS help to taxpayers with both individual and payroll tax problems. He teaches attorneys, CPAs and Enrolled Agents in the finer aspects of IRS representation all around the United States. He can be reached at his website at http://www.getIRShelp.com