What Is a Tax Penalty?

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When it comes to the filing of your tax returns, the IRS has very strict rules with regards to deadlines by which these returns have to be filed. However, there are many people and businesses that fail to file their returns on time for one reason or another and this is where the subject of tax penalties arises. A tax penalty is a financial penalty that can be imposed by the IRS in the event that you fail to file your tax returns on time. The penalties are designed to encourage individuals and businesses to get their returns filed on time.

What Is the Rate for Tax Penalties?

The tax penalties that may be imposed by the IRS stand at 5 percent of the amount of unpaid tax for each month or part month the return is late, and this can go up to a maximum of 25 percent. Tax penalties are not only imposed for filing your tax return late but can also be imposed if you fail to pay your taxes on time even if you filed your return in a timely manner. In order to avoid these penalties it is important to ensure you take the time to get your tax return filed in plenty of time and that you budget effectively so that you can pay your taxes on time.

If you are struggling to get your tax paid on time, it is also important to speak to the IRS or to your accountant, as this could help you to avoid costly penalties. By burying your head in the sand and failing to take action you will almost inevitably be hit by penalties whereas if you take action and explain your situation your accountant or the IRS can provide you with details of possible solutions that could help you to avoid costly penalties.

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