Accuracy-Related Penalty

Accuracy-Related Penalty

The Accuracy-Related Penalty is a financial penalty imposed by the Internal Revenue Service (IRS) on taxpayers who understate their tax liability due to negligence or disregard of rules and regulations, or who substantially understate their income.

This penalty is typically set at 20% of the underpayment amount. Common scenarios that can lead to this penalty include failing to report income, improperly claiming deductions or credits, or making errors in the calculation of the tax owed. Taxpayers can generally avoid this penalty by demonstrating reasonable cause for the underpayment and acting in good faith when filing their tax returns.