Calculating Your IRS Penalties

Every year, millions of Americans file their taxes on time.  They either pay the government the amount owed or wait patiently to receive their refund. But what happens when you don’t pay what is owed to the Internal Revenue Service (IRS)?  What types of penalties will you be looking at when everything is said and done?

Well, that depends on how much money or property you have defaulted on, as far as your taxes are concerned.  Most believe their penalty will be monetary. However, there is the possibility you may have to forfeit property.  If it comes to it, you may have to go before a federal judge with the possibility of jail time.  These penalties are based on how much money is owed to the government.  The amount owed will continue to accrue the longer you put off paying.

We will not be able to cover all 150 types of civil penalties written in the United States Internal Revenue Code.  We will cover the some of the most well-known ones.

What Are Some of the Most Common Penalties?

Failure to Pay – This occurs when you have either not paid the taxes you owe for the year or have not filed for an extension.

Failure to File – This occurs when you have not gotten your taxes in the mail before the designated date of April 15 or have not filed for an extension.

Underpayment of Estimated Taxes – This occurs when you do not pay enough in quarterly taxes or have not had enough withheld from your paycheck.

Bounced Check or Credit Card Declined – This occurs when you do not have enough money in your account or you have given a bad credit card number.

Calculating Your Penalties and How It Is Done

Failure to Pay Penalty – Internal Revenue Code §6651(a)(2)

1. If your taxes are not postmarked on or before April 15 – 0.5%
2. If you continue to not pay the full amount owed, you will continue to accrue a 25% interest rate until the full amount is paid
3. Even if you make your payment for the prior month, in the middle of the following month, you are still going to have to pay all the way through the current month.

Failure to File – Internal Revenue Code §6651(a)(1)

1. It is mandatory to pay 5% of the taxes to be reported
2. You will be charged 30% each month if you are also being penalized for failure to pay.
3. Your charge will be applied for a full month if your taxes are received after April 15, but still in the month of April.
4. 100% of the tax required must be noted on your taxes that you did not pay on time.  Here are the specific dollar amounts:
   • $435 for returns due or after 1/1/2020
   • $210 for returns due between 1/1/2018 & 12/31/2019
   • $205 for returns due between 1/1/2016 & 12/31/2018
   • $135 for returns due between 1/12009 & 12/31/2015
   • $100 for returns due before 2009

Underpayment of Estimated Taxes – Internal Revenue Code §6654

1. It is typical for estimated payments to be made to the IRS every quarter.  If you receive a raise throughout the year, it is up to you to account that into your quarterly taxes. You may have to use Form 2210. This number will be calculated separately from each individual payment previously received. The interest rate is dependent on how many days/months your underestimation payment is received.

Bounced Check or Credit Card Declined – Internal Revenue Code §6657

1. Payment over $1,250, you will owe 2% of the amount owed
2. Payments less than $1,250 is $25

Is it Possible to Remove My Penalties?

Contact McCauley Law Offices, P.C. to see how we can assist you with removing or assisting with penalties you are currently deal with.

At McCauley Law Offices, P.C., our lawyers will find a solution to your tax problems, no matter how complex your IRS issue is. View our services and contact us (or call 610-388-4474) to schedule a free consultation with one of our tax attorneys. View and purchase Gregory McCauley’s published work “TAXJAMS: Simple Solutions” on Amazon. From our office in Chester County, Pennsylvania, we find tax solutions for clients throughout the country.