Penalties and Interest

If you fail to file or pay your taxes, the penalties and interest will accumulate and could leave you with a tax debt that is significantly more than what you originally owed. Don’t let that tax debt control and ruin your life, your business, and your family – contact Moskowitz, LLP.

For over three decades, our tax attorneys and accountants have helped countless individuals and businesses obtain forgiveness of various types of tax penalties associated with federal and state income taxes, payroll taxes, sales, and use taxes, real estate taxes, local and other taxes.

Tax penalties

Following are just some IRS penalties that may be assessed against you:

  • A late filing penalty of 5% of the amount of tax due each month (or partial month), up to 25% of the amount due on your tax return. In addition, if your payment is more than 60 days late, the IRS will impose a minimum penalty of the lesser of $205 or 100% of the tax due.
  • A late payment penalty of 0.5% of the amount of tax due for every month (or partial month) that the tax remains unpaid, up to a maximum of 25%. This penalty will apply even if you filed an extension.
  • If you have substantially understated your tax as a result of negligence, you may be assessed a 20% to 40% accuracy-related penalty.

If the IRS determines that you had specific intent to evade your taxes, you will be assessed a civil fraud penalty of 75% of the amount the IRS deems is fraudulent. You may also be charged with criminal fraud, which could result in your being incarcerated in a federal penitentiary.

The California FTB, EDD, CDTFA, and other local tax authorities each have their own penalty structure for late tax returns and other tax matters.

Interest on tax underpayments

The IRS, state, and local taxing authorities will charge interest beginning the day after your payment is due and the rates vary.

Tax penalty relief

In some circumstances, tax penalties may be waived or reduced. For example, there may be an administrative waiver if you reside in an area recently affected by a natural disaster such as a flood or fire. Penalties may also be abated for reasonable cause (e.g., death, serious illness, divorce, or other relevant circumstances). Penalties will also be removed if it is determined that the IRS made a mistake or if a statutory exception applies.

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