IRS penalties

The Internal Revenue Service (IRS) is primarily responsible for charging these penalties at the Federal level.

Criminal penalties may include jail time, but are imposed only by a federal judge after a defendant is convicted.

[1] Excise taxes used as penalties are imposed in the Code sections relating to particular kinds of transactions.

There are over 150 kinds[2] of civil penalties in the U.S. Internal Revenue Code, ranging in severity which is reflected in the amount of the applicable fines.

Penalty for Failure to Timely Pay After Issuance of Notice: If a taxpayer fails to pay any additional tax assessed by the IRS (usually as a result of an audit which can be avoided[7]) the taxpayer may be liable for a penalty equal to 0.5% for each month (or partial month) during which the failure continues, if the amount is not paid within 21 calendar days after the date of an IRS notice demanding the payment.

The failure to file penalty is imposed and starts to accrue interest from the due date of the return.

[9] The Internal Revenue Service advises that if the taxpayer wants to compute the penalty for failure to timely file and the penalty for failure to timely pay the tax shown on the return, or the interest, and to pay those items at the time the return is filed, the taxpayer can "identify and enter the amount in the bottom margin" on the second page of Form 1040.

[15][16] Employers are required to withhold income and social security taxes from wages paid to employees, and to pay these amounts promptly to the government.

[19] There have been reported cases of the IRS seizing houses of those failing to pay over employee taxes.

[21] Penalties for failure to timely file are $10,000 to $50,000 per form, plus possible loss of foreign tax credits.

U.S. corporations more than 25% owned, directly or indirectly, by foreign persons must file Form 5472 to report such ownership and all transactions with related parties.

[24] Similar transferors to foreign corporations failing to file Form 926 may face penalties of 10% of the value of the transfer, up to $100,000.

[28] Charities and private foundations must pay an excise tax on prohibited transactions and other failures.

[29] Intentional filing of materially false tax returns is a criminal offence.

[35] However, the courts rarely modify assessment of the penalties and interest for underestimate or late payment.