IRS Penalties refer to financial charges imposed by the Internal Revenue Service (IRS) on taxpayers who fail to comply with tax laws and regulations. These penalties can arise from various situations, including late filing of tax returns, underpayment of taxes, failure to pay taxes owed, and inaccuracies in tax reporting.
Common types of IRS penalties include:
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Failure-to-File Penalty: Charged when a taxpayer does not file their tax return by the due date, typically 5% of the unpaid tax amount for each month the return is late, up to a maximum of 25%.
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Failure-to-Pay Penalty: Imposed when a taxpayer does not pay the taxes owed by the due date, generally 0.5% of the unpaid tax amount per month, also up to a maximum of 25%.
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Accuracy-Related Penalty: Applied when there is an understatement of income or overstatement of deductions, typically 20% of the underpayment amount.
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Fraud Penalty: A more severe penalty, generally 75% of any underpayment attributable to fraud.
Understanding these penalties is crucial for taxpayers to avoid unnecessary financial burdens and ensure compliance with IRS regulations.
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