Taxpayers who don’t meet their tax obligations may owe a penalty.
The IRS charges a penalty for various reasons, including if you don’t:
- File your tax return on time
- Pay any tax you owe on time and in the right way
- Prepare an accurate return
- Provide accurate information returns
We may charge interest on a penalty if you don’t pay it in full. We charge some penalties every month until you pay the full amount you owe.
Understand the different types of penalties, what you need to do if you get a penalty and how to avoid getting one.
The Internal Revenue Service Office of Chief Counsel today announced the Settlement Days program will continue remotely enabling unrepresented taxpayers to work towards resolving their pending United States Tax Court case despite “stay-at-home” orders in many jurisdictions. The first two events are for docketed cases with place of trial in Detroit or Atlanta. Future events may be scheduled in other cities throughout the United States.
Virtual Settlement Days is a coordinated effort to resolve Tax Court cases by giving taxpayers not represented by counsel the opportunity to receive free tax advice and possible representation from Low Income Taxpayer Clinics (LITCs) or other pro bono organizations. Taxpayers can discuss their Tax Court case and federal tax issues with members of the IRS Office of Chief Counsel, Appeals and Collections.
The program is geared to help unrepresented taxpayers receive free assistance in discussing a potential fair settlement of their tax disputes in an informal setting without the need for further litigation or a trial in Tax Court. The vast majority of taxpayers participating in previous Settlement Days programs have resolved their cases; most of those who ended up with a liability have been able to enter into an installment payment arrangement.
The Tax Court canceled scheduled trial sessions in a series of Orders issued on March 11, 13 and 23, 2020. The Tax Court Orders state that it is expected that parties will continue to work together to exchange information and address pending issues. The Settlement Days events accomplish the Tax Court’s goals by allowing the parties to work towards settling case on a remote basis.
Most Serious Problems At IRS
Section 7803 (c)(2)(B)(ii) of the Internal Revenue Code, as amended by the Taxpayer First Act (TFA), requires the National Taxpayer Advocate to submit this report each year and to include in it, among other things, a description of the ten most serious problems encountered by taxpayers as well as administrative and legislative recommendations to mitigate those problems. Previously, the report was required to contain a description of at least 20 of the most serious problems facing taxpayers. This year’s report, per the TFA, includes the 10 Most Serious Problems. These issues can affect taxpayers’ basic rights and the ways they pay taxes or receive refunds, even if they’re not involved in a dispute with the IRS.
As your voice at the IRS, the National Taxpayer Advocate uses the Annual Report to elevate these problems and recommend solutions to Congress and the highest levels of the IRS.
FATCA was enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts. FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. FFIs are encouraged to either directly register with the IRS to comply with the FATCA regulations (and FFI agreement, if applicable) or comply with the FATCA Intergovernmental Agreements (IGA) treated as in effect in their jurisdictions.
For access to the FATCA regulations and administrative guidance related to FATCA and to learn about taxpayer obligations please visit the Internal Revenue Service FATCA Page.
In order to see the list of countries who have “in force” agreements with the United States IRS, you can view the list here.
When I was a kid we lived across the street from the Wolfermans. The Wolfermans got a dog. One day I was in my yard, and their dog was barking. Mr. Wolferman came out, clapped his hands and called the dog. The dog joyfully bounded to Mr. Wolferman. Mr. Wolferman then proceeded to spank the dog, apparently for barking. I remember thinking what a fool Mr. Wolferman was for doing that – the dog would never come to him again when called.
A couple of weeks ago I described the traumatic experience of a client who had received a $10,000 penalty notice from the IRS for a completely invalid purpose. As the owner of a foreign trust, my client had done all she could have done to comply with the filing requirements of a foreign trust owner. She was compliant, yet was slapped with a $10,000 penalty. See Foreign Trusts: IRS Penalty Notices For Late Forms 3520-A Traumatize Many Innocent Taxpayers!
Since then, I have learned firsthand of dozens of similar notices, and I suspect there have been thousands issued for the same invalid purpose. Then, this week, another client contacted me about receiving the exact notice under the exact circumstances.
Below is the letter I wrote to the IRS on behalf of the client who received the latest notice. The recipients of these notices represent foreign trust owners who are doing their best to obey the law (the Wolfermans’ dog) only to be punished by a formidable but misguided tax collection agency (Mr. Wolferman). Would one blame the dog for wandering off to find someone kinder and wiser to pledge allegiance to (as in expatriation)?
The Department of the Treasury and the Internal Revenue Service issued Revenue Procedure 2019-40 and proposed regulations that provides relief to certain U.S. persons that own stock in certain foreign corporations.
The Revenue Procedure limits the inquiries required by U.S. persons to determine whether certain foreign corporations are controlled foreign corporations (“CFCs”). The Revenue Procedure also allows certain unrelated minority U.S. shareholders to rely on specified financial statement information to calculate their subpart F and GILTI inclusions and satisfy reporting requirements with respect to certain CFCs if more detailed tax information is not available. It also provides penalty relief to taxpayers in the specified circumstances.
The tax code recognizes the importance of home ownership by allowing you to exclude gain when you sell your main home. To qualify for the maximum exclusion of gain ($250,000 or $500,000 if married filing jointly) you must meet the Eligibility Test , explained later. To qualify for a partial exclusion of gain, meaning an exclusion of gain less than the full amount, you must meet one of the situations listed in Does Your Home Qualify for a Partial Exclusion of Gain? , later.
Before considering the Eligibility Test or whether your home qualifies for a partial exclusion, you should consider some preliminary items.
Transfer of your home to a spouse or an ex-spouse.
Generally, if you transferred your home (or share of a jointly owned home) to a spouse or ex-spouse as part of a divorce settlement, you are considered to have no gain or loss. You have nothing to report from the transfer and this entire publication doesn’t apply to you. However, there is one exception to this rule. If your spouse or ex-spouse is a nonresident alien, then you likely will have a gain or loss from the transfer and the tests in this publication apply.
Significant tax consequences result from the classification of a worker as an employee or independent contractor. These consequences relate to withholding and employment tax
requirements, as well as the ability to exclude certain types of compensation from income or take tax deductions for certain expenses. Some consequences favor employee status, while others
favor independent contractor status. For example, an employee may exclude from gross income employer-provided benefits such as pension, health, and group-term life insurance benefits. On
the other hand, an independent contractor can establish his or her own pension plan and deduct contributions to the plan. An independent contractor also has greater ability to deduct work related expenses.
Under present law, the determination of whether a worker is an employee or an independent contractor is generally made under a facts and circumstances test that seeks to determine whether the worker is subject to the control of the service recipient, not only as to the nature of the work performed, but the circumstances under which it is performed. Under a special safe harbor rule (sec. 530 of the Revenue Act of 1978), a service recipient may treat a worker as an independent contractor for employment tax purposes even though the worker is in fact an employee if the service recipient has a reasonable basis for treating the worker as an independent contractor and certain other requirements are met. In some cases, the treatment of a worker as an employee or independent contractor is specified by statute.
I have been fortunate the past couple of years to have been able to travel. I find that as I check off places on my bucket list, I keep adding on to it! I have been bitten by the travel bug! We recently went to Munich, Germany and climbed 14 stories to the top of The Kirche of St. Peter. The climb through the narrow stairway was somewhat crowded and tight at times but it was absolutely worth it! The views at the top were breath-taking.
Of course when you travel, you need your passport. What happens when you owe taxes to the Government, can they revoke your passport? If you remember, back in 2015, there was a Law passed called the FAST Act. The Act was mostly about transportation but they got in a clause that if you owed more than $50,000 in taxes, the Government could revoke your existing passport or deny you a new passport.
Under Section 32101 of the FAST Act, if the IRS certifies a taxpayer as having a ‘seriously delinquent tax debt”, which is: (1) Owing $52,000 or more in taxes and (2) Meeting certain other requirements under IRC §7345(b), the State Department must deny the taxpayer’s original or renewal passport application and may revoke or limit an existing passport.
This IRS notice lists the population census tracts the Secretary of the Treasury (Secretary) designates as qualified opportunity zones (Zones).
Section 13823 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for the fiscal year 2018,” P.L. 115-97, which was enacted December 22, 2017, amended the Internal Revenue Code (Code) by adding §§ 1400Z-1 and 1400Z-2.
Section 1400Z–1(b)(1)(A) of the Code allows the Chief Executive Officer (CEO) of each State to nominate a limited number of population census tracts to be designated as Zones for purposes of §§ 1400Z-1 and 1400Z-2. Revenue Procedure 2018-16, 2018-9 I.R.B. 383, provided guidance to State CEOs on the procedure for making these nominations. Section 1400Z-1(b)(1)(B) of the Code provides that after the Secretary receives notice of the nominations, the Secretary may certify the nominations and designate the nominated tracts as Zones.