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IRS Penalties—Denver, Colorado
Failure to comply with federal tax laws can be costly for your business
If your Denver, Colorado business fails to comply with federal tax laws or tax filing requirements—whether intentional or unintentional—those mistakes can be costly. There are more than 100 IRS tax penalties the IRS can use against your business, and the government has a wide variety of enforcement techniques to collect them.
Common Tax Penalties
The failure to file or filing late penalty is one of the easiest penalties to avoid and the steepest the IRS will assess. This penalty assesses your business 5 percent each month you do not file and maxes out at 25 percent of your original tax bill in as little as five months from the due date of the tax return.
The failure to pay penalties also maxes out at 25 percent, but you get to that maximum point more slowly than with the failure to file or late filing penalty. This penalty is 0.5 percent a month and can be reduced to 0.25 percent a month if you enter into a payment arrangement with the IRS. However, it can also increase to 1 percent a month if a final Notice of Intent to Levy has been issued.
An accuracy-related penalty results when you take deductions that can’t be proven or don’t report your total income. Accuracy-related penalties are generally discovered through an audit by the IRS and are considered negligence-related penalties. They can add an amount of 20 percent to your tax bill.
A fraud-related penalty is the harshest penalty the IRS will assess and the easiest penalty to avoid. It is a result of the IRS determining you filed a tax return overstating deductions and under-reporting income with an intent to commit fraud against the government. This can result in a penalty of 75 percent on the underpaid amount of tax.
A Trust Fund Recovery Penalty is assessed against the individual business owner or responsible officer when a business does not pay its payroll taxes—also known as trust fund taxes. This penalty assesses the payroll tax amount that was not paid by the business.
A penalty that we don’t see often but can be assessed is a civil penalty against businesses for not reporting wages paid to employees or independent contractors. These penalties can range from $30 to $100 per unfiled 1099-MISC form with a maximum annual penalty of $500,000 or as little as $15 per unfiled W-3 form. Penalties assessed for unfiled W-2s are $50 per form, and this penalty is not one that goes away once the form is filed which is a common misconception.
The best way to avoid tax penalties and assessments is to file your taxes on time and set up a payment plan if you can’t pay them right away. You will almost always end up paying more when you don’t file on time.
True Resolve can help.
The Enrolled Agents at True Resolve Tax Professionals in Denver have the expertise to work on your behalf to reduce or even eliminate IRS penalties and fees. We have years of experience negotiating complicated Penalty Abatement requests, helping to position your business in the best light and demonstrating that you acted with reasonable cause and not willful neglect.
Call True Resolve today and let us stand between you and the IRS. Our business is managing your tax burden so you can focus your energy and talents on the business you know best—your own.