IRS Tax Penalties

Back taxes are prior tax liabilities that have been fully or partially unpaid. Taxpayers can have unpaid back taxes at the IRS or State level, which accumulate penalties and interest.  IRS tax penalties can be of many types.  There are Failure to File penalties, Failure to Pay penalties, Interest on the IRS tax penalties, and more.  If you owe IRS tax penalties, then a good starting point would be to request your IRS Account Transcripts.  These transcripts give a bird’s eye view of what types of IRS tax penalties may have accumulated over the years.  By analyzing these transcripts, you or a hired tax professional can determine if there may be a First Time Penalty Abatement (FTPA) available to you, which would lower your liability.  
 
A good way to avoid future IRS tax penalties is to make payments on estimated taxes throughout the year (for self-employed individuals), or to have more withheld from your pay checks (for W-2 earners).  
 
Sometimes before IRS tax penalties arise, the IRS takes an educated guess about what your tax liabilities might be. The IRS does this when you omit to file a particular form and/or a particular year’s tax return.  The IRS will then send you a Notice of Proposed Assessment, or even file a return on your behalf, called a substitute for return (SFR). However, you can reduce or eliminate the proposed assessment by filing your tax return. The IRS otherwise will impose IRS tax penalties and interest on the tax liabilities associated with this assessment.