If you filed your taxes incorrectly or late, you may be subject to penalties imposed by the IRS. Here are a few of the various consequences and how you can handle them.
Penalty for late filing: If you file your return after the due date, you’ll have a penalty that accrues at five percent per month (not to exceed 25 percent).
Penalty for late payment: Late payment begins to accrue at 0.5 percent per month. If the tax remains unpaid after you receive notice and demand for payment, this penalty will increase to one percent per month (not to exceed 25 percent).
Accuracy-related penalty: If the IRS discovers inaccuracies in your return that leads to an increase in your tax liability, you’ll receive a hefty 20 percent penalty.
The cost of failure to file: The penalty for not filing tax returns can be financially burdensome. The IRS assesses not only a punitive charge but adds interest for failure to file tax returns, which accrues on any liability not paid by the filing deadline. These charges are difficult to get removed and can quickly inflate the total debt you owe.
If you don’t file a return, you haven’t got away with anything yet – the IRS can file for you through a Substitute for Return (SFR) in addition to charges.
Consequences Beyond Monetary Fees:
A severe but possible penalty if you fail to file tax returns is imprisonment for each year that is unfiled.
What to Do to Avoid Tax Penalties:
Tax debt can be an unwelcome and overwhelming financial strain, often leading to sleepless nights and worries about what the IRS will do next. One option to mitigate the financial strain is to submit a penalty abatement form (Form 843 Claim for Refund and Request for Abatement), which can reduce your liability if approved.
Filing a Penalty Abatement Form 843
Don’t ignore your tax issues before it’s too late. Contact Tax Defense Network for a no-cost, confidential consultation and to start your journey to tax debt resolution.