Colorado Springs: Why Does the IRS Charge Penalties?

 

There are many advertisements from national companies claiming that they can eliminate penalties from the Internal Revenue Service.  If it was only that easy to get an IRS penalty abated.  Before we can discuss how IRS penalties can be abated, we need to cover why the IRS charges penalties.

1. IRS penalties are to encourage voluntary compliance -- Our tax system is voluntary, but not everybody files or pays their tax on time.  Penalties for non-filing and non-payments are designed to encourage taxpayers to handle their personal and business tax matter in a timely manner.
2. Conserves IRS resources -- When people comply with their tax obligations, because they want to avoid paying penalties, that frees up IRS resources to pursue those who are seriously and perhaps criminally avoiding the paying of their taxes.
3. Provides clear guidance to taxpayers  -- When taxpayers fail to file their tax return or fail to pay their taxes the guidance is clear on the percentage of penalty they will pay for not meeting their tax obligations.
4. Ensure consistent and fair treatment of the issues -- When a taxpayer fails to file their tax return on time, a 5% penalty of the unpaid taxes can accumulate up to 25% of the unpaid taxes.  
5. Ensure noncompliant behavior is penalized -- For taxpayers who just do not want to cooperate with the IRS, the penalties are designed to motivate such behavior into compliance.

Now that we know why the IRS charges penalties, we will discuss in the blog about penalty abatement and why a tax professional such as an Enrolled Agent is important in helping you to deal with the IRS.

Cash Tracks Financial Inc.

Marcelino Dodge, EA

525 N Cascade Ave

Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

(Call for an appointment)