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Potential IRS Penalties for Tax Non-Payment

Potential IRS Penalties for Tax Non-Payment

Federal law and IRS regulations state that if you don’t file your tax returns or pay your taxes in a timely fashion, the IRS will charge you pretty significant penalties. A penalty will apply for each month of 0.5 percent for the first month and each additional month or partial month that the tax remains owing, subject to an aggregate maximum of 25 percent of the taxes owing. The IRS applies the penalty to the net amount due, so any amount paid will reduce the overall debt. 

If you miss certain deadlines in making your payments, the IRS can increase the monthly penalty to 1 percent of the total owing. 

The penalties in the case of a fraudulent failure to file triple the penalty payments and aggregate maximum. You can also be charged penalties for the income you failed to report on your return. 

On the other hand, if the individual establishes an installment agreement with the IRS, the penalty amount is halved during any month when it is in effect. 

The IRS also charges interest on the sum you owe and on your penalties.

Criminal Penalties

Federal law makes it a criminal offense to fail to file a return but does not make it a criminal offense to fail to pay your taxes. In the latter case, only the civil failure to pay penalties described above pay. Of course, filing a false return in which you do not disclose all your income is a criminal offense and can result in prison time. 

As a side note, it is illegal to intentionally pay less than you owe in income taxes in California. It is, accordingly, a criminal offense to under-report your income, lie on your return, or fail to file a return. 

Consult with San Francisco Tax Attorneys Today

If you are facing possible penalties for tax liability or you believe you might in the near future, reach out to SF Tax Counsel for assistance from experienced Bay Area tax lawyers right away.