As a legal assistant, I can provide general information on the common IRS penalties for underpayment of taxes. However, it is important to note that the specifics of each case may vary and individuals should seek advice from a licensed attorney for personalized legal advice.
Underpayment of taxes can result in several penalties from the IRS. The most common penalties include:
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Failure to Pay Penalty - This penalty is applied when a taxpayer fails to pay the full amount of taxes owed by the due date (including extensions). The penalty is usually 0.5% of the unpaid taxes for each month or partial month that the taxes remain unpaid, up to a maximum of 25% of the unpaid tax amount.
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Underpayment Penalty - This penalty is applied when a taxpayer fails to pay at least the minimum required amount of taxes throughout the year. The penalty is calculated by multiplying the amount of the underpayment by the applicable interest rate and the number of days the underpayment existed.
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Accuracy-Related Penalty - This penalty is applied when a taxpayer makes errors or underpays taxes on their tax return due to negligence or disregard of tax rules and regulations. The penalty is usually 20% of the underpayment amount.
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Late Filing Penalty - This penalty is applied when a taxpayer does not file their tax return by the due date (including extensions). The penalty is usually 5% of the unpaid tax amount for each month or partial month that the return remains unfiled, up to a maximum of 25% of the unpaid tax amount.
It is important to note that there may be certain exceptions or limitations to these penalties, such as reasonable cause or hardship. Taxpayers may also be able to request abatement or reduction of penalties through an appeal or settlement process.
If a taxpayer is facing IRS penalties for underpayment of taxes, it is important to seek legal advice from a licensed attorney to determine the best course of action for their specific situation.
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