Tax penalties are assessed by the Internal Revenue Service, or IRS, for three reasons.  The IRS can assess penalties for failing to file the return, failing to pay the tax liability, or both.  Penalties are assessed based on the amount that is owed.

Late Filing Penalty:  The late filing penalty is calculated from the time that the taxes are due (extensions included) until the date that the return is filed.  The penalty for filing late is usually 5% of the unpaid tax liability for each month that the return is late.  The penalty cannot exceed 25% of the unpaid tax liability.

Failure to Pay Penalty:  If taxes are not paid by the due date, a penalty of .5% will be assessed each month until the taxes are paid.  This penalty can total up to 25% of the unpaid taxes.

When taxes are owed, it is better to file the taxes on time, even if the taxpayer cannot pay at the time the return is filed.  Filing for an extension in a timely matter can also help the taxpayer reduce or avoid late filing penalties completely.

The IRS does not assess penalties if a taxpayer can show just cause why the tax return was not filed or filed late and/or the tax liability was not paid.   A certified tax professional can assist taxpayers who are facing tax liability penalties to determine if an adjustment, or abatement, of the tax liability penalties is justified.  In these cases, the IRS can lesson or remove the penalties to reduce the tax liability.

Whether you have a problem with a late payment penalty or late filing penalty, we can help.  Call us today at 1-877-839-1105 or send us an email using our contact form.