Common IRS Penalties
The IRS has well over 100 civil and criminal penalties at its disposal. These penalties can range from a few dollars to several million dollars. Although not as common, they can even result in jail time.
Civil & Criminal Tax Penalties
IRS penalties are to “enhance voluntary compliance.” There are over 140 separate IRS penalty provisions. The most common IRS civil penalties include the fraudulent return, fraudulent failure to file return, accuracy-related penalties, failure to file, failure to pay, and frivolous return penalties.
Fraud Penalties
The fraudulent return penalty is set out in Section 6663. This penalty is “75% of the portion of the underpayment which is attributable to fraud.” The fraudulent failure to file return penalty is set out in Section 6651(f). This penalty also has a maximum 75% rate.
Accuracy Penalties
The accuracy-related penalties are set out in Section 6662. This penalty is 20% of the amount of the understatement attributable to the conduct penalized. Accuracy penalties are divided between the negligence penalty, the substantial understatement penalty, and the substantial valuation misstatement penalty.
Failure to File Penalties
The failure to file penalty is set out in Section 6651(a). This penalty is 5% of the amount required to be shown on the return, per month up to a max of 25% of the amount required to be shown on the return. If the return is filed more than 60 days after the due date, the minimum penalty is the lesser of $100 or 100% of the tax required to be shown on the return.
Failure to Pay Penalties
The failure to pay penalty is set out in Section 6651(a)(2) & (3). This penalty is 0.5% per month up to 25% of the amount shown as due on a tax return.
Failure to Deposit Penalties
The failure to pay estimated tax penalty is set out in Sections 6654 and 6655. The penalty is based on the general underpayment interest rate under Section 6621 calculated on the installment amount based on the “required annual payment” from the date that the estimated installment is due to the earlier of the date the tax is paid or the original due date of the return.
Frivolous Submission Penalties
The frivolous submission penalty is set out in Section 6702. This penalty imposes a $5,000 fine for filing a frivolous income tax return and a $5,000 fine for filing a frivolous submission.
Help With Your IRS Penalties
We help taxpayers avoid penalties and interest. If the IRS has assessed penalties and interest or expressed an intent to do so, we want to hear from you.
Please call us at (713) 909-4906 or schedule an appointment to discuss your IRS penalties with our tax attorneys.
Recent IRS Penalty & Interest Articles
- Can Jury Trial for IRS Penalty be Conditioned on Paying the Penalty First?
There have been a number of court cases that have considered whether various administrative agency determinations violate constitutional jury trial rights. These are often premised on the fundamental promise of American justice that courts should remain open to all. The… Continue reading Can Jury Trial for IRS Penalty be Conditioned on Paying the Penalty First? - Can a Criminal Prosecution Delay a Civil Tax Case?
Imagine that you earned significant income and failed to file tax returns. You later file the tax returns once the IRS caught on to you, but you omitted a large part of your income. The government indicts you on criminal… Continue reading Can a Criminal Prosecution Delay a Civil Tax Case? - Is a Taxpayer Accountable for their Tax Preparer’s Fraud?
Most taxpayers opt to hire professionals to prepare their tax returns. Tax professionals understand the complexities of deductions, credits, and reporting requirements that can overwhelm even sophisticated business owners and investors. Once the tax returns are filed and a few… Continue reading Is a Taxpayer Accountable for their Tax Preparer’s Fraud?
More IRS penalty and IRS interest articles.
Watch Our Free On-Demand Webinar
In 40 minutes, we'll teach you how to survive an IRS audit.
We'll explain how the IRS conducts audits and how to manage and close the audit.