What is IRS Penalties & Types of IRS Penalties

Facing a penalty is often very intimidating, especially if it is coming from the Internal Revenue Service (IRS). In case you fail to pay the dues that you are responsible for, you might as well be on the verge of facing charges you didn’t know existed from the IRS penalties.

The IRS can charge a variety of tax penalties for failing to meet your responsibilities as a taxpayer. The IRS is going to automatically assess the penalties in case you go on to missing any.

The other penalties that occur are usually assessed in case the IRS goes on to believe that you intentionally violated the tax laws by means of tax evasion or fraud. The IRS penalty can be hefty, significant and a long-drawn procedure, if not taken seriously.

So, What is IRS Penalties?

IRS Penalties are financial charges the Internal Revenue Service (IRS) imposes for multiple types of non-compliance with tax laws. It is equally important to note that the IRS does have the authority to assess penalties for different ranges of actions and inactions, including but not limited to failure to pay taxes owed, failure to file a tax return and more importantly, accuracy-related issues.

The amount of penalty is widely going to depend on the type of non-compliance, alongside how severe the violation is. Penalties, as is also often claimed by the IRS, can usually be assessed as a percentage of the amount a taxpayer originally owes, a flat fee each month, or a simple combination of each. However, there are times when you do not have to pay the penalty – but only if you can show a reasonable cause for the failure in the first place.

But note that penalties can often be significant in size since they can add up quite quickly if left unpaid over the course of time. Thus, it makes it very important to take IRS notices and letters very seriously, because if not, they can cause you trouble in your way. The best way to deal with it is by getting in touch with one of the major tax advisory services in order to understand what options you have in hand.

Types of IRS Penalties

There are a variety of IRS Penalties that individuals often come across. Some include Failure to File Penalty, Failure to Pay Penalty, Accuracy-Related issues, among many others. Some of the many types of IRS penalties include;

Failure to File Penalty

These penalties often pile up quite rapidly. The Failure to File Penalty is often imposed on the basis of the number of months during which the Failure to File has continued. Which is why, when the return is received by the Service, it is considered critical. This penalty is assessed in case it is found that you did not file your tax return by the due date or by any extension granted to you. The penalty is typically 5% of the tax you originally owed for every month or part of a month that the return is late, up to a maximum of 25%.

Failure to Pay Penalty

The Failure to Pay Penalty often also piles up pretty quick. The failure to pay a penalty is one of the many types of penalties assessed by the IRS when a taxpayer does not pay their taxes by the due date.

A penalty, simply, is imposed on those who fail to pay the amount shown in form of tax on any return, except if it is due for a reasonable cause.

In case you fail to pay your taxes by the due date, you are subject to 0.5% of the unpaid taxes every month or part of a month that the tax is late, up to a maximum of 25%. In case the return is unfiled, then both the late payment and the late filing penalties pile up concurrently.

Accuracy-Related Penalty

Several taxpayers who face Accuracy-Related Penalties from the IRS. In case you have made a mistake on your tax return or understate your tax liability, you are potentially subject to an accuracy-related penalty of up to 20% of the underpayment. It surrounds several separate and distinct penalties, including those that have been imposed for reporting particular positions that do not have any significant authority or substantially misstated. This is one of the major IRS types of Penalties.

Estimated Tax Penalty

The Estimated Tax Penalty is levied when taxpayers don’t pay their taxes timely, either via withholding or estimated tax payments. It is generally calculated on the basis of the amount of underpayment that has been seen to occur. It is also assessed on a quarterly basis and can further be avoided if taxpayers meet a requirement. These rules basically require taxpayers to either pay the full 100 per cent of previous year tax liability, or about 90 per cent of their current year tax liability.

Tax Preparer Penalty

This penalty is originally applied to the tax return preparers who desperately and deliberately engage in different forms of misconduct.

Failure to Deposit

This type of penalty usually applies when you do not pay the employment taxes appropriately or on time.

Do you want a tax audit representation? Get in touch now!

How much is the IRS Penalty for Late Filing?

The question of how much is IRS penalty for late filing? has always raised eyebrows. The penalty for late filing of tax returns with the IRS is usually evaluated on the basis of the amount of tax the taxpayer owes and the time span of the return being overdue.

For certain individual taxpayers, the penalty is typically around 5 percent of the unpaid Tax amount per month or part of the month during which the return is late, up to a maximum of 25 percent of the unpaid taxes. This clearly answers the long asked question how much is failure to file penalty?

It is very essential to know that if the taxpayer is unable to pay the due amount in full, they should still file their tax return on time in order to avoid any form of late filing penalty. The penalty for failure to file is usually higher than the penalty for failure to pay. Until the amount is paid, the interest is going to accrue as well.

How to Waive IRS Penalties and Interest?

The question of how to waive IRS penalties and interest has always stirred in the crowd. In case you owe the government money, there are a couple of options open for you to potentially waive or at least reduce them in amount.

So, how do I get IRS to waive penalties and interest? The answer is simple.

First-Time Penalty Abatement (FTA)

If a taxpayer has a clean history of compliance with the IRS for almost three years in a row and has not had any previous penalties assessed, then you probably will be eligible for an FTA. This enables for the waiver of one failure to file, failure to pay, or failure to deposit for one tax year.

Offer in Compromise

If you’re unable to pay the tax amount in full and can also show the IRS that paying the full amount can potentially cause financial hardship, then you qualify to negotiate an Offer in Compromise with the IRS. This might as well allow for elimination of penalties and interest.

Reasonable Cause

If you can answer the IRS, and show them reasonable cause for the penalty or interest, such as a natural disaster, death in the family or serious ailment, then the IRS may waive the penalty or interest. In this case, you are required to provide documentation and evidence to support your claim of reasonable cause. This is one of the many ways to answer how to get IRS to waive Penalties and Interest.

Installment Agreement

If you are unable to pay the tax in full but can make sure to pay monthly payments, then you probably qualify for an Installment Agreement with the IRS.

These are some of the ways regarding how to get IRS penalty and interest waived.


IRS penalties can be significant, often piling up quickly, resulting in a substantial financial burden for the person paying. Understanding the various types of penalties and the circumstances in which they are applied is vital for taxpayers in order to avoid legal consequences. It is best to contact major tax consulting services to understand where you stand as a taxpayer. Do you need professional advice? Get in touch with Proffitt & Associates now, and schedule a consultation!

Leave a Reply

Your email address will not be published. Required fields are marked *

You’ll never have to deal with the IRS. We will represent you and manage any matters with professionalism, secrecy, and a keen interest in your financial well-being.

Contact us

Copyright © 2024 – Proffitt & Associates, INC – All Rights Reserved