When to Expect an IRS Penalty!

When it comes to penalties, the IRS is like a Wild West gunslinger with unlimited ammunition. The agency has more than 148 different penalty types it can use to hit taxpayers where it hurts: in the wallet.?

Even worse, the IRS can stack those penalties on top of each other — charging interest and fees on the original penalty! Here at Landmark Tax Group, we’ve seen clients come in with extreme back tax debt that was doubled or even tripled by IRS penalties.?

To avoid a penalty, it’s important to know when you can expect one. Here are two of the most common situations that trigger IRS penalties.?

1. Failing to file your tax return by the tax due date: If you don’t file on time, the IRS can slap you with a “failure to file” penalty. This is a fee totaling 5% of your unpaid taxes for each month, or part of a month, that your tax return is late. That penalty starts accruing the day after the tax filing due date. The only silver lining is that it won’t go over 25% of your unpaid taxes.?

Those numbers may sound small, but they add up quickly! Say you owe the IRS $10,000. Your starting penalty would be $500 and could quickly climb as high as $2,500, bringing your tax burden up to $12,500.?Then there's interest, which accrues on the penalty and the tax, by law.

2. Failing to pay the tax you owe by the tax due date: If you didn’t pay your taxes on time, you can expect a “failure-to-pay” penalty. This fee is usually .5% of your unpaid taxes. Like the “failure to file” penalty, the “failure to pay” penalty applies for each month, or part of a month, after the due date and starts accruing the day after the tax-filing due date.?And, of course, interest is then added.

Ideally, taxpayers will file and pay their taxes on time every year. But if they can't, all isn’t lost! You may be able to remove these penalties and related interest. Visit LandmarkTaxGroup.com/Penalty for "10 Ways to Get IRS Penalties Removed!"