Owing taxes to the government can be overwhelming and stressful.  However, not paying or filing will surely increase your stress levels and may cripple you financially! IRS Tax Penalties are severe and expensive!  They can quickly increase your tax debt to double, triple or more in less time than you realize!

IRS Tax Penalties can be assessed if you fail to file your taxes and if you fail to pay your taxes by the due dates given.  On top of those penalties you will also be charged interest beginning on the original due date and accruing until the entire debt is paid in full!

Failure to File Penalty is calculated beginning from the date your return was due (including any extensions) to the date you actually file your return.  The actual penalty is usually 5% for each and every month the return is late.  (That is 5% of the actual amount of taxes due as a result of this return).  The maximum on this penalty is 25%.  If your tax return is more than five months late, you would multiply the total tax amount due by 25% and that is what you would owe in failure to file penalties alone.

Failure to Pay Penalties is calculated using the amount of tax you owe multiplied by 0.5% for each month you are late.  There is no maximum here!  Therefore if you finally pay your total tax debt 10 months after they were due, you would have to add 0.5% to each of those 10 months.  As you can see the IRS Tax Penalties can add up substantially and quickly!

Interest is charged on the amount of taxes you owe from the due date until the debt is paid in full.  The rate is variable as the Interest Rates change every 3 months or so.  Again there is no maximum here, so interest continues to be added to your balance for each DAY that you are delinquent.

If you know you are going to be late filing, or paying your taxes file for an extension!  You may be able to avoid penalties if your extension is approved.   Moreover, if you know you will not be able to pay the taxes that will be owed, contact the IRS before the due date!  You can work out a payment arrangement with them, which would avoid Liens and Levy’s that would surely make matters even worse for you. Be aware that you may still be assessed penalties and interest on any monthly payment arrangement, but at least you will be able to prevent extensive and intrusive collection activities by the IRS.

Ignoring your debt to the IRS could lead to losing your home, business, property, bank accounts etc.  You do not need to go down this road!  Contact a tax professional to assist you when dealing with the IRS.  Not only are they much more educated on the current tax laws, but they can help explore your options based upon your specific situation!  Don’t hesitate, as the IRS will pull out all the stops to get the money owed to them!