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A Complete Guide to the Most Common Tax Penalties

In Finance
October 06, 2022
Tax Penalties

Are you wondering what happens if you file your taxes late? How much more can you owe in tax if you miss the deadline?

Tax penalties can be risky business.

The IRS isn’t messing around, and you need to worry about the penalties if you file your tax late. There are various penalties, but the accuracy-of-refund penalty concern people the most.

What does that mean for you? Tax penalties can drastically increase how much you owe!

In this article, we’ll give you a complete guide to the different penalties you can face so you can avoid being worried this tax season.

The Most Common Tax Penalties

You may be penalized if you’re behind on your payroll taxes. You may be charged with failure-to-pay penalties or failure-to-file penalties.

You’ll be assessed a failure-to-pay penalty if your taxes aren’t paid on time. There is a penalty equal to 0.5% of the total amount owed for each month- or a portion of a month that the tax is due. The maximum fine is 25% of the amount of unpaid taxes.

You will be charged a failure-to-file penalty if your tax return is not submitted on time. For each month or portion of a month that the tax return is late, a fine of 5% of the unpaid tax amount is applied. 25% of the amount of the due tax is the maximum penalty.

If you file your tax return but don’t pay the total amount you owe, you’ll be charged a failure-to-pay penalty and a failure-to-file penalty. The penalties will be calculated separately.

How to Deal with Tax Penalties

If you’re facing any of these penalties, seeking professional help to resolve the issue as soon as possible is essential. There are several back payroll tax resolution services that can help you get your taxes in order and avoid further penalties.

First, you can request an extension to file your return. This will give you more time to pay and may lessen the failure-to-file penalty.

If you cannot pay your taxes in full, you may be able to set up a payment plan with the IRS. This will allow you to make smaller payments over a while.

To settle your tax debt for less than the whole amount owed, you could also be able to negotiate an offer in compromise. If you’re paying by credit card, you’ll need to be aware of the fees and interest added to your balance.

Finally,  you can request a waiver of the penalty. This is usually only granted in cases of excessive hardship or where the taxpayer can show that the failure to file or pay was due to circumstances beyond their control.

Don’t Let Tax Days Be Hell Days

Not paying your taxes can result in costly penalties. If you’re confused about the most common tax penalties, this guide will clear things up. The fines can be excessive, so you must understand what you’re liable for.

If you face a tax penalty, the best thing to do is contact a tax professional. They can help you determine if you’re at risk for a fine and, if so, how to avoid it.

Confused about the latest tax issues that you should know about? Check out more of our blog to help you understand more!