Meeting the tax demands before the stipulated time is the most important thing to do. If not, the IRS poses several penalties on the defaulters. Every month some amount gets deducted until the person pays the whole amount, in addition to the penalties. This article will discuss the most common IRS tax penalties that are seen.
1. Information Return –
The letter is sent to taxpayers who have not provided their correct information return or statement before the due date. This penalty also keeps on adding interest until the payee completes the whole payment.
2. Failure To File Tax Returns –
This applies to those people who fail to file their tax returns until the due date has reached. A letter is issued to the payee for the same.
3. Failure To Pay Tax –
As the name suggests, this penalty applies when a person fails to pay taxes on time. The penalty keeps on increasing until the full amount is deposited by the taxpayer.
4. Accuracy Penalty –
This happens when a person applies to the deductions erroneously and they do not stand anywhere to receive that mentioned claim.
5. Dishonored Payments –
When a person has insufficient funds in their bank account so the check or other mode of payment is not acceptable.
6. Underpayment Of The Taxes –
When a person fails to pay the taxes in full amount then this penalty comes into action.
There are certain measures that a person may take to avoid these buckets full of penalties.
- A person may ask for extensions of up to 3 or even 6 months.
- Paying the taxes in certain intervals after opting for the tax payment plan could be a real help for some people who cannot afford to pay the whole amount in one go.
- Hiring a tax attorney is the best option as they will always guide an individual about what is best for them in this kind of challenging situation.
These were some of the most common penalties by the IRS that are applied to defaulters at various levels. A person should try their level best to avoid them by paying taxes on time.