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7b - Interest & Penalties

7b - Interest & Penalties - OnlineLectureSeries...

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Tax Penalties & Interest Federal Individual Income Tax  Online Lecture Series Presented by Akore Berliner, CPA
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Interest & Penalties 
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Interest Taxpayers must pay interest on   underpayments of tax. Rate is determined quarterly Based on federal short-term rates The interest rate for underpayments is 7% for  the first quarter of 2008
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Taxpayer Penalties An array of penalties are used to promote  compliance with the tax law
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Failure to file a tax return  Penalty is 5% per month (up to 25%) on  amount of tax due Minimum penalty is $100 If failure is due to fraud, rate is 15% per  month (up to 75%)
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Failure to pay tax due Penalty is 1/2% per month (up to 25%)  on amount of tax due If failure is after notice of deficiency is  received, rate is 1% per month Penalties can be eliminated if “reasonable  cause” exists for failure to file or pay
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Accuracy-related penalties 20% of portion of tax underpayment due to:  Negligence or intentional disregard of law  Substantial understatement of tax liability Substantial valuation overstatement Substantial valuation understatement
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