Avoid these common tax penalties in 2019

The United States tax code is a complex beast. A failure to abide by the rules outlined in the code can result in serious consequences. Depending on the details of the allegations, the consequences for a failure to follow this code can range from relatively minor financial penalties to serious prison sentences.

Some of the most common errors that can result in a penalty include:

  • Deadlines. The Internal Revenue Service (IRS) can assess a penalty to taxpayers who fail to file or pay taxes on time. It is important to note that those who cannot pay their tax bill are still wise to file their tax returns. Though there are repercussions for not paying your tax bill, the penalty for a failure to file tax returns is much higher.
  • Estimated payments. In some cases, the IRS requires taxpayers to make estimated tax payments throughout the year. The most common example occurs when an employer withholds taxes from your paycheck. Those who own their own businesses must make quarterly payments to avoid a penalty.
  • Withdrawal penalties. There are various savings mechanisms that allow taxpayers to input funds tax-free. The catch: a steep penalty can apply if you remove funds without following the specific protocol for the account. Examples of such accounts include retirement accounts, health savings accounts (HSAs) and 529 plans.

In most cases, the IRS will conduct an audit before assessing a penalty. Those who receive notification from the IRS of an audit are wise to act to protect their interests. A tax audit attorney can review the correspondence and provide counsel to better ensure your legal rights are protected.

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