| No one wants to end up in a situation where they owe | | | | penalty. The Internal Revenue Service will hit you |
| tax money to the IRS. The IRS is the most effective | | | | with this one when they believe that you underpaid |
| collections agency in the world. No one wants the | | | | your taxes because you disregarded or ignored tax |
| IRS after them. With that in mind, here are some | | | | regulations. They will also assess this penalty if you |
| common ways taxpayers find themselves in trouble | | | | understated your tax liability. This penalty is twenty |
| with the IRS. | | | | percent of what you owe. |
| One of the most frequent errors in dealing with the | | | | If the Internal Revenue Service finds that you |
| IRS is failing to file a return. Everyone living in the | | | | committed fraud in not paying your taxes, the fine is |
| United States and earning an income here, is subject | | | | seventy-five percent plus the possibility of criminal |
| to filing a tax return, if your income is above certain | | | | prosecution. |
| minimum thresholds. Many taxpayers mistakenly | | | | Owners of businesses and the self-employed often |
| believe that, for some reason or another, they do not | | | | find themselves in a tax jam because of estimated |
| reach filing status. Failure to file, when so required, will | | | | taxes. This particular group has to pay their taxes |
| attach penalties and interest to whatever taxes you | | | | quarterly or even monthly based on their earnings and |
| owe. These penalties and interest can accrue over | | | | estimated taxes. Since they work for themselves, |
| time to the point where they eclipse the initial tax | | | | they are solely responsible for their tax liability. If you |
| liability. If you fail to file when required to do so, the | | | | should be making estimated tax payments and fail to |
| IRS has the option of filing a return for you. You are | | | | do so in the course of the year, you could be facing a |
| then liable for any taxes the IRS says you owe on this | | | | very large tax liability when you file your return. Many |
| return. | | | | first time business owners and those recently |
| Filing a late return will cost you five percent in penalties | | | | self-employed are not even aware of the need to file |
| per month, reaching a maximum of twenty-five | | | | estimated tax payments. When starting out on your |
| percent. If you file your return on time, but don’t | | | | own, you should consult with a tax expert in order to |
| actually pay the tax, your penalty will be assessed at | | | | determine what rights and obligations will be entailed in |
| one half of a percent for every month that you failed | | | | your new filing status. |
| to pay the taxes. Next, there is the accuracy related | | | | |