Failing to file your taxes can trigger a variety of IRS penalties, and understanding them is the first step toward avoiding unnecessary financial pain.
Failure-to-File Penalty
If you don’t file your return by the due date, the IRS can charge 5% of your unpaid taxes per month, up to 25% of the total amount owed. This penalty is higher than the failure-to-pay penalty, so filing even if you can’t pay in full is always better.
Failure-to-Pay Penalty
This penalty is generally 0.5% of the unpaid balance per month, accumulating until the debt is fully paid. Even partial payments can reduce penalties and interest.
Interest
Interest accrues daily on any unpaid taxes, so delays in filing or paying can quickly increase your total liability.
Enforced Collections
In extreme cases, the IRS can garnish wages, levy bank accounts, or file substitute returns without your input, often resulting in a higher tax liability.
How to Avoid or Reduce Penalties
- File voluntarily as soon as possible.
- Seek penalty abatement if you have reasonable cause.
- Work with a CPA to reconstruct income and deductions accurately.
- Negotiate installment agreements or other IRS relief programs.
At Tax Rescue CPA, we specialize in helping clients navigate IRS penalties, reduce interest charges, and file unfiled returns safely. Early action can save thousands in fees and stress. Don’t wait until it’s too late. Contact Tax Rescue CPA to protect yourself from IRS penalties and get back on track.
