| The IRS is much feared when it comes to | | | | What if you file the tax return on time, but don't |
| government agencies. While the audit is the tool of the | | | | actually pay the tax then due? You are still going to |
| IRS, most people will never experience it. Instead, we | | | | face a penalty, but it is going to be much less than |
| are all far more likely to pay penalties at one point or | | | | what you faced with the failure to file penalty. This |
| another. Although not nearly as stressful as an audit, | | | | penalty will equate to half a percent per month you |
| they can add up quickly and do serious damage to | | | | didn't pay the tax. That is pretty painless. |
| one's bank account. | | | | The accuracy related penalty is a step up in penalties. |
| There are a host of penalties that can be assessed | | | | This penalty is assessed when you under pay your |
| from a tax perspective. One need only look at Willie | | | | tax because you show negligence or disregard for the |
| Nelson who was so far upside down on his taxes that | | | | tax regulations. It can also be assessed if you |
| he had to actually release a CD for which all the | | | | understate the tax due. The penalty in this situation is a |
| revenue went to the IRS! Hopefully, none of us will | | | | hefty 20 percent of the underpayment. |
| ever be in that situation, particularly since I sing like a | | | | Fraud is something that really gets the IRS fired up. If |
| cat in an alley. Still, there are common tax penalties we | | | | you under report the tax you owe because of a |
| may all walk into. Let's take a look at them. | | | | fraudulent move, the penalty is a killer. How so? It is 75 |
| Filing your tax return late is definitely going to generate | | | | percent. Yes, 75! There is a very decent chance you |
| a penalty. The penalty is usually 5 percent of each | | | | will also face criminal charges for the fraudulent act, |
| month you are late. That being said, the penalty caps | | | | which raises the specter of jail time. |
| out at 25 percent. Ah, but a percentage of what? The | | | | The tax code is full of provisions allowing the IRS to |
| percentage is applied to the tax that was due. If you | | | | have at you if it finds fault with your efforts regarding |
| owed $10,000 and didn't file for 6 months, the penalty | | | | taxes. The above represent the most common |
| would be $2,500. | | | | assessed penalties, but hardly all of them. |