If you fall under that slab for tax payment, it is important that you pay your taxes on time. You also need to make sure that you do not file a fake tax return. This may lead to penalties and interest which we all know as a taxpayer. But how is this calculated by the IRS? This is very confusing at times.
To understand how this is calculated, you can make use of the IRS tax penalties calculator. Or here is the better idea about the penalty calculation given below:
Types of Penalty Charges
Late filing:
If you have missed filing your tax, then as per the IRS regulations, you will need to pay the penalties (added to your bill) with the interest rate on the past tax amount that you need to pay. It is generally 5% of the tax amount that you owed per month or part of the month, with the return due for 5 months (25%).
Late payment:
If you have filed the tax but missed paying it, then the penalty here would be one-half of the one percent (0.5%) of the actual tax to be paid for each month or the part of the month, till you pay the total amount.
Failure to Pay penalty:
If you fail to pay the penalty, then you will have to pay a maximum of 25% of the unpaid taxes.
Underpayment of estimated tax: In this case, the penalty is calculated on the underpayment, the due date, and underpaid and quarterly interest rates of the underpaid amount.
Accuracy-related penalties:
This happens in two cases. One is when the individual does not follow the tax return rules. Second, when the tax amount is understated by 10% or $5000 whichever is higher.
Dishonored cheques:
It is charged when there is no substantial amount in the account for the payment. Here the penalty is the payment amount. Or it is $25 if the amount due is less than $1250 or 2% of the amount if it is more than $1250.
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