All You Need To Know About IRS Penalties and Interest

If you have not filed your taxes for a long time or have back taxes, interest and penalties are continuously accumulating. Our office can help you solve this IRS problem.

Failure to file the correct tax forms and paying your tax debt late are punishable by interest and penalties.

Types of Penalties

• Accuracy - 20% penalty added to your bill for understated income on your return
• Fraud - 75% for a fraudulently filed tax return
• Failure to File Penalty. If you filed late you will pay 5% every month up to 25%.
• Failure to Pay Penalty. If you failed to pay on time you will pay a quarter of a per cent to 1% per month of the amount you failed to pay.
• Combined - 5% per month for both late filing and payment

The penalties are pretty heavy, as you can see. If you know that you're going to need more time to prepare your return, file an extension. Your Failure to File Penalty can be eliminated, or at least reduced.

It's essential to note that if you have a refund coming and file late, there's no penalty charged since penalties are calculated from the amount that is due.

Interest

If you have tax debt, it is considered as borrowed money from the U.S. government, so interest will be calculated, with penalties. The interest rate formula was set by Congress and adjusted every quarter and compounded daily, ranging from four per cent to 10 per cent per year.

Often the only way to get interest removed from your tax debt is if it was charged as an IRS error. It can happen if:

• delays in the IRS.
• an Offer in Compromise will decrease your bill if determined that you won't be able to pay the tax and interest.
• tax and penalties were abated, and interest is cancelled.
• declaring bankruptcy, your last option.

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