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.
Following is a brief summary of each penalty and the associated interest for it.
Failure to File (FTF) – 6651(a)(1)
Failure to Pay Amount Shown on Return – 6651(a)(2)
Failure to Pay Amount Assessed (FTPAA) – 6651(a)(3)
This penalty applies to amounts not shown on the return but are subsequently assessed by the IRS.
If you have any questions using TaxInterest software, please give our Support Team a call at 800-426-4741 or shoot us an email at support@TimeValue.com.