IRS Penalties and Interest

Penalties and interest are forever accruing if you have tax debt or haven't filed taxes for a while. Our office has experts in this and other IRS issues, so let us assist you.

Failure to file the correct tax forms and settling your tax debt late are punishable by interest and penalties.

Types of Penalties

• Failure to File – 5% to 25% every month for late filing
• Failure to Pay – 0.25% to one per cent every month of total amount for not paying on time
• Combined – 5% per month for both late filing and paying
• Fraud – 15% each month for 5 months for underreporting your income, a total of seventy-five per cent
• Accuracy – twenty per cent on top of our bill for understating your income

Filing an extension will give you additional time to prepare your tax return and reduce, or even eliminate your Failure to File Penalty.

It's important to note that if you have a refund coming and file late, there is no penalty charged because penalties are calculated from the balance that's due.

Interest Facts

Penalties and interest will be calculated, since the IRS considers tax debt borrowed money. Set by Congress, the interest rate formula is adjusted every quarter and compounded on a daily basis, ranging from four per cent to 10% each year.

An IRS error can have interest removed from your tax debt. You might succeed if one of these situations occur:

• delays in the IRS.
• an Offer in Compromise will decrease your bill if determined that you will now be able to pay the tax and interest.
• tax and penalties were abated, and interest is cancelled.
• filing for bankruptcy, your last option.

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