IRS Penalty's

Question 1

What is the tax provider penalty for understatement due unreasonable position?

Answer 1

Greater of $1000 or 50% of fee

Question 2

What is the tax provider penalty for Understatement due to willful or reckless conduct?

Answer 2

Greater of $5000 or 75% of fee

Question 3

What is the penalty for failure to file a tax return?

Answer 3

5 percent of tax due if failure is less than 1 month, with an additional 5 percent for each additional month or fraction thereof, not exceeding 25 percent

Question 4

What is the penalty for failure to pay tax due?

Answer 4

.5 percent of tax due if failure is less than 1 month, with an additional .5 percent for each additional month or fraction thereof, not exceeding 25 percent

Question 5

Is interest due on late tax payments? How is it calculated?

Answer 5

Yes;
Interest will be calculated from the day after the payment due date through the payment date at the interest rate in effect on the day after the payment due date;

Question 6

There is a 20% penalty on taxpayers for the following underpayments:

Answer 6

• Underpayments attributable to negligence or disregard of rules or regulations.
• Any Substantial underpayment of income tax

Question 7

What is a Substantial underpayment of income tax?

Answer 7

-For individuals, a “substantial understatement” is one that exceeds the greater of:
10% of the tax, or
$5,000.

-For non–Subchapter S corporations, a “substantial understatement” is one that exceeds the lesser of:
10% of the tax (or, if greater, $10,000), or
$10 million.

Question 8

No understatement penalty is imposed if:

Answer 8

(a) there was “reasonable cause” for the underpayment and (b) the taxpayer acted with “good faith.”