Avoid Business Tax Penalties

A tax penalty is an additional charge imposed by a federal organization such as the IRS or a state agency such as your state treasury, on top of the taxes you already owe. 

• Failure to file your tax return on time
• Failure to pay any tax you owe on time
• Failure to pay any tax you owe through the correct method
• Failure to prepare an accurate tax return 
• Failure to provide accurate information on your tax return

• Information Return — When businesses don‘t file or furnish their required information return or payee statement correctly by the due date.
• Failure to File — When businesses don’t file their tax return by the due date.
• Failure to Pay — When businesses don’t pay the taxes owed by the due date.
• Accuracy-Related — When businesses don’t claim all their income or they claim deductions or credits for which they don’t qualify.
• Erroneous Claim for Refund or Credit Penalty — When businesses submit claims for refund or credit of income tax for an excessive amount and reasonable cause does not apply.
• Failure to Deposit — When businesses don’t pay employment taxes accurately or on time.
• Tax Preparer Penalties — When tax return preparers engage in misconduct.
• Dishonored Checks or Other Form of Payment — When business banks don’t honor their check or other form of payment.
• Underpayment of Estimated Tax by Corporations — When businesses don’t pay estimated tax accurately or on time for a corporation.
• International Information Reporting — When businesses fail to timely and correctly report foreign-sourced financial activity.

If you receive a penalty from the IRS or state agency, they will send you a notice by mail that will detail the penalty, how much you owe, and the next steps you need to take to address it. Depending on the type of tax penalty you receive, you may be able to resolve, reduce, or dispute it.

You can make a payment for your penalty or pay your taxes in full through the IRS or state agency website. Please be aware that any penalties will continue to accrue interest until they are completely paid off.

You can request for the fee to be removed or reduced by providing a reasonable explanation for failure to file or pay your tax obligations or if you have a history of good tax compliance. You may be eligible for penalty relief if you made an effort to comply but were unable to do so because of uncontrollable circumstances.

Once you receive a penalty notice, you have a short window of time to appeal to the agency. Be prepared to confirm your penalty details, which penalty you want them to reconsider, and why. 

It's important to file your tax returns accurately, pay your taxes on time, and provide any necessary information returns promptly. If you are unable to do so, you may be able to apply for an extension to file or a payment plan.