Thinking about not filing your tax return because you don’t have the money to pay the tax liability? Don’t do that! The penalties for not filing are 5% per month for 5 months all by themselves. That constitutes a 25% penalty for simply not filing the return.
IRS penalties constitute a large portion of past due tax liabilities. They, together with interest, can soon equal or exceed the amount of the tax liability.
IRS Penalties are huge. Some of the most common ones are:
(If the tax return is more than 60 days late, the minimum penalty is the smaller of $100 or 100% of the tax owed.) 5% per month of the net tax due (maximum 25%)
Late filing due to fraud
15% per month of the net tax due (maximum 75%)
Late tax payments
0.5% per month of the unpaid tax due (maximum 25%) The 0.5% rate increases to 1% after the IRS issues a notice of intent to levy.
Negligence or disregard of tax rules and regulations
20% of tax underpayment
75% of tax underpayment
Substantial understatements of income tax
(tax underpayments that exceed the greater of 10% of the correct tax liability or $5,000) 20% of tax underpayment