You might encounter several types of IRS penalties in Baltimore in a lifetime. Most IRS penalties are related to a filer’s failure to pay, failure to pay on time, or disregard of income tax rules.
If you need help with any type of IRS dispute, call an experienced tax litigation attorney at Whiteford Tax Defense. We are well-versed in civil tax law, criminal tax law, and business tax law. We will work hard to protect your rights and your finances.
The IRS may not immediately audit a person or organization if they fail to pay income taxes. Some filers have legitimate reasons for non-payment, such as a major medical emergency or regional catastrophe. The filer may have even asked for an extension, but the form was lost in the mail.
If the IRS knows a filer has earned income but failed to pay taxes, they will start by sending the filer a notice. At that point, the IRS will start calculating their penalty. According to the IRS, they calculate penalties based on whether the taxpayer:
If a taxpayer pays less than the amount due, the IRS will charge 0.5% of those unpaid taxes for every month they remain unpaid. That penalty is capped at 25% of the unpaid taxes. This is one of the most common types of IRS penalties a Baltimore taxpayer can encounter.
If the IRS discovers that a taxpayer failed to report income and therefore failed to pay the taxes due, it may assess a penalty based on the underpayment. An accuracy-related penalty is usually assessed at 20% of the amount underpaid. Interest may accrue on those unpaid amounts.
Individuals facing those penalties may need to work with a lawyer to show that they made a good faith effort to report all income and that the underreporting was an error, not an act of negligence or an attempt at fraud. A lawyer can help collect the evidence needed to showcase the taxpayer’s actions and how the error occurred.
When a taxpayer submits their tax return and pays taxes, but fails to accurately report the amount they earned, they can face an accuracy-related penalty. A negligence or disregard of rules and regulations penalty is assessed when the individual does not make a reasonable effort to follow tax rules or recklessly ignores tax rules and regulations.
The substantial understatement of income tax penalty is assessed when tax liability is understated by at least 10% or by $5,000, whichever is greater. Accuracy-related penalties for deductions and credits are assessed at the same rate as failure to report income, or 20% of the underpayment due to the inaccurate report.
At Whiteford Tax Defense, we help individuals and organizations fight all types of IRS penalties in Baltimore and the surrounding areas. We have the experience you need and look forward to protecting your rights and income throughout this process.
Whether you failed to report cryptocurrency income or interest in your offshore accounts or made some other error on your tax return, our seasoned team will fight the IRS on your behalf. Contact us today for a consultation to learn how we can help you protect your assets.