Tax penalty relief, part 2: What are the most common types?

Let's resume our discussion of tax penalties and the possibilities for getting relief from them.

In part one, we focused on first-time abatement (FTA) of penalties. FTA is a program for taxpayers with a strong previous record of complying with tax laws.

In this part of the post, let's use a Q & A format to look at some of the penalties that taxpayers are eligible to seek relief from.

How many tax penalties are there?

Overall, there are more than 100 potential tax penalties. Failure to file, failure to pay and failure to accurately report income are among the most common. But there are also many more specific penalties, such as those that apply to failure to disclose offshore accounts.

What are the most common penalties?

Generally, most tax penalties fall into one of two broad categories. One of these includes penalties related to tax collection. The other broad category involves penalties related to accuracy.

What are examples of collection-related penalties?

Late filing and late payment are the two of most obvious examples of failure of collection-related penalties.

Another common penalty of this type is failure to make required federal tax deposits, such as employment taxes. If you are self-employed, making estimated tax payments is in this category.

What are examples of accuracy-related penalties?

Two of the most common types are substantial understating taxes and negligently understating taxes. Either of those situations can happen when there is a significant underreporting of income.

In an upcoming post, we will discuss how the IRS responds to issues of underreported income.

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