Tax Penalties

The IRS imposes several types of taxpayer penalties. 

Failure to Pay Penalty:  This penalty is .5% of the tax deficiency, which accumulates each month the tax remains unpaid.  If you can prove reasonable cause on why you did not pay the tax promptly, the IRS may abate this penalty.

Failure to File Penalty: This penalty is 5% of the tax deficiency, which accumulates each month not exceeding a total of 25% of the tax deficiency.  Therefore, if the tax remains unpaid after 5 months, this penalty will end at the end of the fifth month. 

Accuracy-related Penalty: This penalty is 20% of any portion of the tax deficiency that is due to negligence, substantial valuation misstatement, substantial understatement of tax, etc.  The penalty can be up to 40% for gross valuation misstatements. 

Civil Fraud Penalty: If there is an underpayment of tax on your return due to fraud, the IRS will impose an additional penalty of 75% on the underpayment.  Additionally, criminal prosecution may also be imposed. 

Penalty on bounced checks: If your check to pay your taxes bounces, the IRS may impose a 2% penalty on the total amount of the check.  If the check is under a certain amount, such as $1,250, the IRS may impose the lesser of this penalty or $25.