The law provides penalties for failure to file returns or pay taxes as required.taxmap/pubs/p519-035.htm#en_us_publink1000222608
If you do not file your return and pay your tax by the due date, you may have to pay a penalty. You may also have to pay a penalty if you substantially understate your tax, file a frivolous tax submission, or fail to supply your taxpayer identification number. If you provide fraudulent information on your return, you may have to pay a civil fraud penalty. taxmap/pubs/p519-035.htm#en_us_publink1000222609
If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty. The penalty is based on the tax not paid by the due date (without regard to extensions). The penalty is usually 5% for each month or part of a month that a return is late, but not more than 25%. taxmap/pubs/p519-035.htm#en_us_publink1000222610
If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%. taxmap/pubs/p519-035.htm#en_us_publink1000222611
If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax. taxmap/pubs/p519-035.htm#en_us_publink1000222612
You will not have to pay the penalty if you show that you failed to file on time because of reasonable cause and not because of willful neglect. taxmap/pubs/p519-035.htm#en_us_publink1000222613
You will have to pay a failure-to-pay penalty of 1/2 of 1% (.50%) of your unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. This penalty does not apply during the automatic 6-month extension of time to file period, if you paid at least 90% of your actual tax liability on or before the due date of your return and pay the balance when you file the return.
The monthly rate of the failure-to-pay penalty is half the usual rate (.25% instead of .50%) if an installment agreement is in effect for that month. You must have filed your return by the due date (including extensions) to qualify for this reduced penalty.
If a notice of intent to levy is issued, the rate will increase to 1% at the start of the first month beginning at least 10 days after the day that the notice is issued. If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning after the day that the notice and demand is issued.
This penalty cannot be more than 25% of your unpaid tax. You will not have to pay the penalty if you can show that you had a good reason for not paying your tax on time. taxmap/pubs/p519-035.htm#en_us_publink1000222614
If both the failure-to-file penalty and the failure-to-pay penalty (discussed earlier) apply in any month, the 5% (or 15%) failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax. taxmap/pubs/p519-035.htm#en_us_publink1000222615
You may have to pay an accuracy-related penalty if you underpay your tax because:
- You show negligence or disregard of rules or regulations, or
- You substantially understate your income tax.
The penalty is equal to 20% of the underpayment. The penalty will not be figured on any part of an underpayment on which the fraud penalty (discussed later) is charged.
The term "negligence" includes a failure to make a reasonable attempt to comply with the tax law or to exercise ordinary and reasonable care in preparing a return. Negligence also includes failure to keep adequate books and records. You will not have to pay a negligence penalty if you have a reasonable basis for a position you took.
The term "disregard" includes any careless, reckless, or intentional disregard. taxmap/pubs/p519-035.htm#en_us_publink1000222617
You can avoid the penalty for disregard of rules or regulations if you adequately disclose on your return a position that has at least a reasonable basis. See Disclosure statement
This exception will not apply to an item that is attributable to a tax shelter. In addition, it will not apply if you fail to keep adequate books and records, or substantiate items properly.taxmap/pubs/p519-035.htm#en_us_publink1000222619
You understate your tax if the tax shown on your return is less than the correct tax. The understatement is substantial if it is more than the larger of 10% of the correct tax or $5,000. However, the amount of the understatement is reduced to the extent the understatement is due to:
- Substantial authority, or
- Adequate disclosure and a reasonable basis.
If an item on your return is attributable to a tax shelter, there is no reduction for an adequate disclosure. However, there is a reduction for a position with substantial authority, but only if you reasonably believed that your tax treatment was more likely than not the proper treatment.taxmap/pubs/p519-035.htm#en_us_publink1000222620
Whether there is or was substantial authority for the tax treatment of an item depends on the facts and circumstances. Consideration will be given to court opinions, Treasury regulations, revenue rulings, revenue procedures, and notices and announcements issued by the IRS and published in the Internal Revenue Bulletin that involve the same or similar circumstances as yours. taxmap/pubs/p519-035.htm#en_us_publink1000222621
To adequately disclose the relevant facts about your tax treatment of an item, use Form 8275, Disclosure Statement. You must also have a reasonable basis for treating the item the way you did.
In cases of substantial understatement only, items that meet the requirements of Revenue Procedure 2010-15, 2010-7 IRB 404 (or later update) are considered adequately disclosed on your return without filing Form 8275.
Use Form 8275-R, Regulation Disclosure Statement, to disclose items or positions contrary to regulations. taxmap/pubs/p519-035.htm#en_us_publink1000222622
You will not have to pay a penalty if you show a good reason (reasonable cause) for the way you treated an item. You must also show that you acted in good faith. taxmap/pubs/p519-035.htm#en_us_publink1000222623
You may have to pay a penalty if you file an erroneous claim for refund or credit. The penalty is equal to 20% of the disallowed amount of the claim, unless you can show a reasonable basis for the way you treated an item. The penalty will not be figured on any part of the disallowed amount of the claim that relates to the earned income credit or on which the accuracy-related or fraud penalties are charged.taxmap/pubs/p519-035.htm#en_us_publink1000222624
You may have to pay a penalty of $5,000 if you file a frivolous tax return or other frivolous submissions. A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax you reported is substantially incorrect. For more information on frivolous returns, frivolous submissions, and a list of positions that are identified as frivolous, see Notice 2008-14, 2008-4 IRB 310 available at www.irs.gov/irb/2008–04_irb/ar01.html
You will have to pay the penalty if you filed this kind of return or submission based on a frivolous position or a desire to delay or interfere with the administration of federal tax laws. This includes altering or striking out the preprinted language above the space provided for your signature.
This penalty is added to any other penalty provided by law. taxmap/pubs/p519-035.htm#en_us_publink1000222625
If there is any underpayment of tax on your return due to fraud, a penalty of 75% of the underpayment due to fraud will be added to your tax. taxmap/pubs/p519-035.htm#en_us_publink1000222626
If you do not include your social security number (SSN) or individual taxpayer identification number (ITIN) or the SSN or ITIN of another person where required on a return, statement, or other document, you will be subject to a penalty of $50 for each failure. You will also be subject to a penalty of $50 if you do not give your SSN or ITIN to another person when it is required on a return, statement, or other document.
For example, if you have a bank account that earns interest, you must give your SSN or ITIN to the bank. The number must be shown on the Form 1099-INT or other statement the bank sends you. If you do not give the bank your SSN or ITIN, you will be subject to the $50 penalty. (You also may be subject to "backup" withholding of income tax.)
You will not have to pay the penalty if you are able to show that the failure was due to reasonable cause and not willful neglect. taxmap/pubs/p519-035.htm#en_us_publink1000222627
You may be subject to criminal prosecution (brought to trial) for actions such as:
- Tax evasion,
- Willful failure to file a return, supply information, or pay any tax due,
- Fraud and false statements, or
- Preparing and filing a fraudulent return.