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IRS Penalties: There are about 150 penalties, but a few would get relief

While most of the penalties are unforgiving and are enforced to the letter by the IRS, a handful of them can be relieved if the taxpayer files a proper application based on the tax rules.


Tax season can be a love-hate time with the IRS. On the one hand, there is nothing more rewarding than receiving a generous refund and payments of tax credits or the benefits of tax exemptions. But the scary part comes when the taxpayer defaults or makes a mistake on their tax return and Uncle Sam imposes penalties.

And you have a choice, since there are about 150 tax penalties. However, it is common for taxpayers facing penalties not to apply for penalty relief or reduction, or to be denied relief or reduction by the tax agency because they do not follow the required guidelines.


THERE ARE ABOUT 150 IRS PENALTIES

While most of the penalties are unforgiving and are enforced to the letter by the IRS, a handful of them can be relieved if the taxpayer files a proper application based on the tax rules.

COMMON IRS PENALTIES

Yes, you read right. There are about 150 different IRS penalties for late filing, late payment, return errors, and other noncompliance actions. Visit the IRS Penalty and Interest fact sheet for more details.

But some sanctions represent 74% of all the most common ones, which are:

  • Penalty for failure to pay: 56% of all penalties, imposed if you do not pay taxes on time.

  • Failure to File Penalty: 14% of all fines, imposed if you fail to file a return on time

The remaining 4% has to do with non-deposit penalties, imposed if a business does not pay payroll taxes on time or pays them incorrectly. But in this article we will focus on individual taxpayer penalties. Now, the three most common IRS penalties are related to late filing and late payment of taxes. That's why we remind you that the deadline to file taxes this year is April 18. This is the trio of penalties that the IRS generally applies:

  • Penalty for no-show: 5% monthly on the balance owed, maximum of 25%.

  • Estimated Tax Penalty: Equal to lost interest for not having enough withheld or paid estimated taxes throughout the taxable year.

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