An IRS penalty is a financial charge imposed by the IRS on taxpayers who fail to comply with tax laws, including not filing tax returns on time, failing to pay taxes owed by the due date, or making errors on their tax returns. These penalties are designed to encourage compliance and timely filing and payment of taxes.
Late Filing Penalty: If you don't file your tax return by the due date (including extensions), the IRS can charge a late filing penalty. This penalty is usually 5% of the unpaid taxes for each month or part of a month that a tax return is late, up to a maximum of 25%.
Late Payment Penalty: If you don’t pay the taxes you owe by the due date, the IRS charges a late payment penalty. The penalty is generally 0.5% of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid.
Accuracy-Related Penalty: When you file your taxes, this penalty may be imposed if there's a substantial understatement of your tax liability or due to negligence or disregard of the IRS rules and regulations. The penalty is typically 20% of the understatement of tax.
Failure to Pay Estimated Tax Penalty: Did you know that if you didn't pay enough taxes during the year through withholding or estimated tax payments, you might be charged a penalty for underpayment of estimated tax?
Dishonored Check Penalty: As a taxpayer, if your bank doesn't honor your check or other form of payment, the IRS may charge a penalty.
The exact amount of the penalty depends on the specific violation and circumstances. The IRS calculates penalties based on the amount of tax owed, the duration of the delay in payment or filing, and other factors.
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