Did you know that there are some IRS tax penalties that can result from an audit? While it may not seem fair, if an inaccuracy is found on your return there is a good chance that you are going to owe more money to the IRS along with some penalties.
If you filed an inaccurate return you could face an IRS tax penalty of 20 percent based on the total understatement. Of course, this is not always the case. That being said, there are times when the IRS has the right to impose a penalty of 40 percent.
The list of errors that can result in a 20 percent IRS tax penalty includes the following:
- Negligence or disregard of regulations
- substantial understatement of tax due
- Disregarding rules and regulations
- Substantially overstating pension liabilities
- Substantially misstating the value of your property
- Understatement of reportable transactions
- Substantial understatement of a gift.
As you can see, it is one thing to make a mistake on your tax return. It is another thing entirely for your return to be full of substantial inconsistencies.
Do you know anything about the IRS civil fraud penalty? This is often times the result of an audit. This is a huge penalty as it is equal to 75 percent of any federal tax that is not paid and believe do be related to fraud. The portion of the underpayment that is not related to fraud could still be slapped with an inaccuracy penalty.
Even though the fraudulent failure to file IRS tax penalty is rare, it can show up during an audit from time to time. This is the case if the IRS can prove that you filed late as a way of evading paying taxes. This penalty is not five percent per month like the standard failure to file penalty. Instead, it is 15 percent per month with a total penalty of 75 percent.
It is important to note that interest can accrue on penalties. If an audit leads to an accuracy related penalty, a civil fraud penalty, or a penalty for not filing on time, interest will begin to accrue starting on the day the return was due. It will continue to accrue on your account until the penalty is paid off in full. With other types of IRS tax penalties interest does not begin to accrue if the penalty is paid off within 21 days of the requested payment date.
Do you have questions regarding tax penalties that can result from an audit? If you are being audited it makes good sense to hire a tax professional. They can offer advice on the audit process, as well as any penalties that you may incur due to this situation.
It may not seem fair, but an IRS audit can lead to many types of penalties. It is bad enough that the IRS is going to review every detail of your return. On top of this, IRS tax penalties may be imposed based on the details above.