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TimeValue Software Blog

IRS Income Tax Penalties and Interest, Part 2

By Martel Pellerin

In addition to the standard Failure to File and Failure to Pay penalties, there are multiple other penalties that can be assessed by the IRS that can be easily calculated and verified using TaxInterest IRS/State interest and penalty software. TaxInterest software will allow you to determine the penalty amount and do the appropriate interest calculation. TaxInterest also handles refund interest for both individuals and corporations.

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IRS Income Tax Penalties and Interest

By Martel Pellerin

The IRS standard penalties for income taxes are all a little different from each other and they are all interest bearing but they have different targets of when the interest starts which can make it challenging. The interest on Federal penalties is computed using the regular underpayment rate and is compounded daily. Interest can start from the return due date, the extension date, or the Notice/assessment date. TaxInterest software is an excellent program to do these varied calculations as all of the calculation methodology is built into each computation.

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TaxInterest Training and Educational Tools

By Martel Pellerin

TaxInterest IRS/State interest and penalty software is the professional standard relied upon by both accounting firms nationwide and the IRS. TimeValue Software offers a wide range of training and educational tools that are highlighted below to facilitate the usage of the TaxInterest software.

You can find the TimeValue Software educational tools on the company website at www.TimeValue.com/support-resources. Here, you will find a webinar for TaxInterest, product Training Videos, frequently asked questions (FAQs), and Blog topics.

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Understanding the IRS’ Failure to File Penalty

By Martel Pellerin

There are some penalties that are pretty straight forward and then there is the IRS Failure to File (FTF) penalty 6651(a)(1).  The FTF is a 5% per month penalty to a maximum of 5 months or 25% from the due date or the extension date, whichever is later. If the FTF and the Failure to Pay (FTP) penalty run simultaneously, you only pay 4.5% for the FTF penalty and it caps out at 22.5% as the IRS is limiting the combination of the two penalties to 5% overall.  That is the good news.

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Estimated Tax Penalty (Interest Calculation)

By Martel Pellerin

Did you know the Estimated Tax Penalty is actually an interest calculation? You calculate interest from each deposit due date with the net amount due and then you calculate the interest till the tax due date. The IRS uses the Federal interest rates for the calculations but they use a simple interest methodology versus daily compounding of interest.

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