IRS PENALTIES

IRS PENALTIES
The IRS just made a huge statement by cracking down on the
well known actor Wesley Snipes. Mr. Snipes was accused of
felony charges of tax fraud and conspiracy as well as three
misdemeanor accounts of failing to file tax returns. The
actor was acquitted of the federal tax fraud and conspiracy
charges; however he was found guilty of the three
misdemeanor accounts and sentenced to the maximum prison
sentence of three years. This sentence sends huge warning
to the millions of taxpayers who fail to file their tax
returns each year. The IRS and the Federal courts are now
willing to penalize those who fail to follow their rules.

There are many penalties that the IRS can charge a taxpayer
with. A few of the most common penalties include estimated
tax penalty, failure to file penalty, failure to pay
penalty, and accuracy-related penalties. Along with
penalties, interest is also charged because of the time
value of money. The estimated tax penalty is one that is
charged when a taxpayer fails to pay the IRS the estimated
tax that is calculated as income is earned during the year.
Most people select the option to take withholding to ensure
that their estimated tax is paid throughout the year.
Others, for example those who are self-employed, make
estimated tax payments throughout the year, usually
quarterly, to the IRS. As long as the taxpayer has paid the
same amount of taxes from the prior year or they have paid
90% of the current year's tax, whichever is smaller, they
will not be penalized.

The failure to pay penalty is for those who do not pay the
tax liability by the April 15th deadline. This penalty
equals one half a percent of the amount of tax owed each
month until the tax is paid. This late payment penalty is
applied to those who filed on time but did not pay on time.
For taxpayers who do not file and owe taxes the interest
rate used is the federal short term interest rate plus
three percent. The rate is recalculated every three months
as the federal interest rate changes.

The penalty for not filing a return with an amount due is
4.5% for each month that the balance is not paid. The
maximum penalty rate charged is 25%. If the return has a
refund there is no penalty charged since penalties are
calculated on amounts due. It is more costly to not file a
return with a tax liability than to file a return with a
tax liability and not pay. In other words, you should
always file your tax return on time regardless of if you
owe money or not.

Accuracy related penalties are charged in regards to
substantial understatement of income tax, negligence or
disregard of rules and regulations, substantial
overstatement of pension liabilities, substantial estate or
gift tax understatement, or any substantial valuation
misstatement. The penalty charged is 20% of any portion of
tax underpayment.

If there is a dispute of the penalties charged you may
write a letter or use form 843 to attempt to have the
penalties abated, however interest is never forgiven. The
only case where interest, penalties, and taxes may be
overlooked is through an Offer in Compromise (also known as
pennies on the dollar).

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I am a specialist who works with those who have their wages
garnished or bank account levied by the IRS. I also help
people get current on filing their tax returns. Please
visit my website http://www.doggedbyirs.com for more
information.