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Tax Penalties & Interests

Protect Your Finances from the IRS

When you are unable to pay your taxes owed to the Internal Revenue Service (IRS), you may be faced with pending penalties and interest accrued on your tax debt. The more you can do to minimize or deflect the penalties and interest, the better.

Tax Resolve in Oakland County has nearly 30 years of legal experience focused on tax laws, IRS interactions, and tax resolutions. Call (248) 919-8029 today to speak with our attorney about how to prevent IRS tax penalties and interests from draining your finances. We offer completely free initial consultations to inquiring clients, so you can learn more about your legal options without worrying about anything else.

Why Does the IRS Penalize Taxpayers?

The IRS is tasked with the difficult job of ensuring every American taxpayer follows the rules and pays all of their taxes accordingly. If someone violates the rules, or is accused of violating the tax laws, the IRS will use a fiscal penalty in response. Penalties can be flat-fees and/or interest amounts tacked onto owed tax debts. In any situation, it means you will be required to pay more money to the IRS as a result.

There are four main reasons why the IRS uses penalties to punish taxpayers:

  • Failure to file: Not filing your tax return on the agreed upon due date will result in penalties. Unless you requested a filing extension that was then approved, your filing due date is April 15th of each year.
  • No payment: You will be penalized if you do not pay taxes that you owe on your tax return by the due date of April 15th. Remember: You cannot extend pay dates, only filing dates.
  • Incorrect estimated tax: If you file to pay estimated taxes each quarter and pay them, you can be penalized if your estimate is noticeably undervalued.
  • Bounced check: Paying the IRS with a check that bounces – or is dishonored by the financial institution that backs it – can result in additional financial penalties.

How Will the IRS Penalize You?

The penalties and interests used by the IRS to penalize taxpayers depend on the type of penalty in question and other details specific to each case.

  1. If you fail to file your taxes on time, you can be charged an additional 5% of the unpaid taxes owed. This amount increases 5% each month you do not file, up to a maximum 25% increase. You can also be charged up to $215 or 100% of the owed amount of your unpaid income taxes, whichever is lesser.
  2. If you have provided no payment to the IRS, you can be charged between 0.25% and 1% of the unpaid amount as monthly interest. This interest can be applied until it hits a maximum of 25% more than the original amount unpaid.
  3. If you pay an incorrect estimated tax amount, the IRS will penalize you using calculations unique to your tax situation, the amount of taxes you owe, and other factors. Each individual installment – or taxes filed quarterly – will be calculated and penalized separately as well. In general, the interest rate for an installment period is multiplied by how many days late you make the owed payment to determine your penalty.
  4. If your check bounced, the IRS will increase the amount you owe by 2% if that amount is above $1,250.00. If you owe less than $1,250.00, the IRS will charge you $25 or 100% of the amount you owe, whichever is lesser.

How Can You Avoid or Remove IRS Tax Penalties?

The easiest way to stop tax penalties from digging into your finances is to pay off your tax debt in full. Once the IRS receives all owed tax amounts, it will release you from any penalties and interest amounts will halt. However, if you could have paid your tax debt in full, you probably would have, and there would not have been any penalties or interests in the first place.

There are alternatives you can explore with our Oakland County tax penalty lawyer, though. If you think you can pay off some of your tax debt, let our attorney know. You might be able to create an Installment Agreement plan that promises the IRS you will repay your tax debt over time and according to the plan. In exchange for your effort and cooperation, the IRS may reduce your penalties and interest amounts, using a case-by-case basis.

You may also qualify for penalty relief programs offered through the IRS. Abatement can be granted to taxpayers who have never had an error on their tax return before, or who have never missed a tax payment before. If successful, the abatement will entirely remove your penalties.

Negotiating with the IRS to get penalty relief is tricky. Leave it to our legal team instead of doing it yourself. Call (248) 919-8029 or contact us onlineto begin.

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