SANTA MONICA PENALTY AND INTEREST ABATEMENT
What to Know About IRS Penalties and Interest in Santa Monica
A taxpayers IRS liability can increase substantially as a result of penalties and interest. The IRS regularly applies various penalties and interest to back taxes, thus making it harder for business and individual taxpayers to pay their outstanding tax debt. The penalties that the IRS applies are mandated by the Internal Revenue Code (IRC), and are most commonly assessed against taxpayers for underpayment or nonpayment of taxes, failure to make payroll tax deposits, or failure to timely file a tax return. Interest is applied to penalties as well as any unpaid tax.
How much is the penalty and interest?
In general, the IRS will charge a five percent (5%) penalty for failing to file a tax return on time and a half percent (1/2%) penalty for failure to pay the taxes when due. Both the failure-to-file penalty and the failure-to-pay penalty are charged for each full month or partial month the return or payment is late, up to 25%. The amount of interest charged by the IRS is determined on a quarterly basis and is calculated from the original due date of the return, regardless of extensions. The interest rate for underpayments of tax is compounded daily and usually falls between two to three percent (2-3%) for individuals and is generally higher for businesses.
How can I get relief from IRS penalties and interest?
Taxpayers can easily prevent the assessment of interest and penalties by always paying and filing their tax returns on time. A filing extension is available for taxpayers unable to file by the return due date of April 15th. Taxpayers can receive an automatic six (6) month extension of time to file by submitting Form 4868 to the IRS. It’s important to note that the extension only extends the time to file your return and does not affect the April 15th deadline to pay your taxes. Self-employed taxpayers and wage earners can protect themselves from the failure-to-pay penalty by ensuring they have sufficient estimated tax payments and withholding, respectively. When interest and penalties have already been assessed against a tax return, the IRS will consider a partial or full abatement of both if a taxpayer meets reasonable cause criteria.
If you need help with penalties and interest in Santa Monica, contact us today at 1-714-382-6780 for a free, confidential assessment with experienced Santa Monica CPAs, enrolled agents, and tax attorneys.
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