Few IRS Penalties for Any Missed Income on your Tax Return
The Internal Revenue Service (IRS) imposes penalties on taxpayers who fail to report all of their income on their tax returns.
Here are a few of the most common penalties for IRS underreported income or missed income:
1. Failure to report penalty
This penalty is imposed when a taxpayer fails to report any income on their tax return. The penalty is equal to 15% of the unreported income, with a maximum penalty of 75% of the total tax owed.
2. Accuracy-related penalty
This penalty is imposed when a taxpayer underpays their tax due to negligence, disregard of rules and regulations, substantial understatement of income tax, or a substantial valuation misstatement. The penalty is equal to 20% of the underpayment amount.
3. Civil fraud penalty
This penalty is imposed when the IRS determines that a taxpayer has intentionally underreported their income to evade paying taxes. The penalty is equal to 75% of the underpayment amount.
4. Criminal penalty
In cases of intentional tax evasion or fraud, the IRS may pursue criminal charges against the taxpayer. This may end up in fine, imprisonment, or both.
To avoid these penalties, taxpayers should be diligent in reporting all of their income on their tax returns. Income can include wages, salaries, tips, interest, dividends, rental income, and more.
It is important to keep accurate records and to double-check all forms, including W-2s and 1099s, to ensure that all income is reported correctly. Taxpayers should also consult with a qualified tax professional if they are unsure about how to report a particular type of income.
Overall, it is important for taxpayers to take their reporting obligations seriously, as the penalties for missed income can be substantial. By being proactive and accurate in their reporting, taxpayers can avoid these penalties and ensure compliance with the tax laws.