For FTF, the IRS charges 5 percent of the net amount due for the first month,
and for each month, or fraction of a month that you do not file, with the
amount not to exceed 25 percent of the net amount due. If the return is not
filed within 60 days of its due date, the minimum you will be charged is $100
or 100 percent of the net amount due, whichever is less. The FTF does not start
accruing if you have filed for a valid extension, but if you fail to file by
the extension deadline, penalties begin accruing immediately.
Failure to Pay:
For FTP, the IRS charges .5 percent per month or fraction of a month, up to 25
percent of the net amount due. This penalty begins accruing immediately, even
if you have a valid extension. And, in addition to these penalties, the IRS
charges interest on all unpaid due.
These two basic
penalty categories ratchet up whenever the IRS smells fraud or intent to evade,
"substantially" or "grossly" underestimate (undervalue or
otherwise misrepresent) the amount of tax you owe. Accuracy-related penalties
are 20 percent of the underpayment in the case of "substantial"
misstatement, and 40 percent of "gross" misstatement.
Failure to File:
In the case of Fraudulent Failure to File (with the intent to evade tax), the
FTF is 15 percent per month, plus a 75 percent fraud penalty. Also note that,
10 days after the IRS sends out its Notice of Intent to Levy, it will increase
the FTP penalty to 1 percent per month. The snowball effect of rolling
penalties and accruing interest can soon bury an unwitting taxpayer, and the
IRS will levy and garnish every asset it can find to pay the bill.
As an experienced CPA, in many instances, I can negotiate tax-debt settlements with
the IRS for those who qualify. The IRS requests that taxpayers have good reason
for penalty abatement
and individuals who want to increase their chances of having their penalties
forgiven should consider consulting with a qualified CPA