IRS Penalties & Interest Rates: A Complete Guide from the Tax Relief Experts
When it comes to taking care of taxes, to make it simple, they’re broken up in two ways: individual taxes and corporate taxes. The penalties and interest for both of these differ. However, we’re not expecting corporations to look in their search engines for information about the Internal Revenue Service’s (IRS) interests and penalty rates. They typically have a team of corporate lawyers to help them along in that area.
At Success Tax Relief, a tax relief firm based in Houston, Texas, we get a lot of questions about penalties and interests. So, we have decided to compose a quick go-to guide that will give you the basic run-down on penalties and interest rates for individual taxpayers.
- Late Filing and Payment Penalty
Many taxpayers may already know about the late filing penalty, but are often caught by surprises when they see the late payment penalty. That is because the IRS expects you to pay whatever you owe with your filing. So, it stands to reason that if you’re late filing, you’re going to be late paying. Thus, the double one-two hit of the late filing and payment fee. The IRS states that the penalty for filing late is 5% for up to 5 months. After 5 months, the penalty increases by 1% of the unpaid tax balance. The good news is that it cannot exceed 25%. The bad news is that you’ll receive an Intent to Levy notice if you have not paid.
According to the IRS, “For returns due after 12/31/2008, the minimum penalty is the lesser of $135 or 100% of the tax due. For returns due after 12/31/2015, the minimum penalty is the lesser of $205 or 100% of the tax due.”
- Underpayment Penalty
Paying the partial amount of what you owe will not cut it if you haven’t officially worked out a payment arrangement with the IRS. If you have paid less than what you owe, then you will be charged an underpayment penalty. As far as the IRS is concerned, according to your records, you did not pay what you owe.
Writing an insufficient check to the IRS is a really bad idea. Although, we understand that oftentimes, money in the checking account can be mismanaged. Don’t let that happen, especially if your disbursing funds to the IRS, because guess what? There’s also a Failure to Deposit/Insufficient Fund penalty. For checks that are at least $1,250 or more, expect to pay a 2% penalty. If it’s under, then the fee will be a flat $25.
Other types of penalties to look out for is fraud, filing and incomplete returns.
In a nutshell, if you don’t file or pay your taxes on time, expect to pay more! This is a quick guide to reference, but if you’re looking for more detailed information, contact the professionals at Success Tax Relief at 877-825-1179 or contact us online at either of our Texas or Georgia offices.