Tax season is no walk in the park for any person. Going through the trouble of figuring out the amount owed serves as a difficult and stressful task for most, and on top of that, no one can ever fully predict whether or not they will undergo an IRS audit.
On top of collecting taxes and handing out refunds, it is also up to the IRS to dole out potential penalties. This serves as yet another major stress, and sometimes an expensive one to boot.
Reasons for IRS penalties
The IRS discusses potential penalties that taxpayers may face. The most common reasons for penalties include some relatively simple and easily avoidable things, such as lacking a required filing, returned tax payment checks, incorrect information in a return, or underpayment of taxes.
The nature of the perceived violation will often influence the type of penalty a person might have to face. Unsurprisingly, the vast majority of penalties are monetary in nature.
Monetary and criminal penalties
People facing a monetary penalty from the IRS should ideally take care of the matter as soon as possible. Letting a penalty sit will allow for interest and additional penalties to stack up on top of it, which can create a financial nightmare for anyone.
In some cases, the IRS may even serve criminal charges against someone. This comes from certain types of malfeasance, including tax fraud or evasion. If convicted of such crimes, a person could face fines, probation, incarceration and other potential criminal penalties.
In short, when receiving a letter from the IRS regarding a potential wrongdoing or charge, it is important to address it right away.