Let us talk of a very common scenario. You filed your tax return within due time and paid taxes fully as per your return. However, suddenly, one fine morning, got a notice titled Notice CP2000. That notice basically states that the IRS desires to add to your income based on various kinds of information it has about payments made to you. If you do not reply or your reply is not accepted by the IRS, then a bill for additional tax for the adjustment to income that you did not include (but IRS did !) will be mailed to you.
When will IRS charge penalty for failure to pay tax as per notice of adjustment ?
IRS will impose a penalty if you do not pay the tax as stated in the notice of adjustment within Stipulated time. So what is the usual time given for payment of tax demanded by IRS through demand notice for adjustments? It depends!
The usual time to pay is 21 days from receipt of the notice to pay the tax following adjustment of income. However, if the tax amount as per notice is $100,000 or more, you get only 10 days to pay.
Penalty Calculator for Failure to Pay
The calculator should be used by taxpayers who filed tax returns and had no tax outstandings as per the tax return filed.
The Penalty Calculator for Failure to Pay Tax as per Notice of Adjustment presumes you filed tax return within time and tax due as per return filed was NIL. Then you received a bill for payment of additional tax as per adjustment notice.
Rules followed by Calculator for Penalty Computation on Failure to Pay Tax After Notice of Adjustments
If you owe tax that you didn’t report on your return or paid on time, we calculate the Failure to Pay a penalty in this way:
- Penalty computed only after it remains unpaid after the stipulated 21 calendar days after IRS sends the notice or 10 business days if the tax amount you owe is $100,000 or more.
- The Failure to Pay Penalty rate is 0.5% per month on the tax you didn’t pay .
- Even one day late counts as one month!
- If an approved payment plan, the penalty rate will be 0.25% per month during the agreement period.
- If you receive an intent to levy notice and did not pay within 10 days of receiving it, the Failure to Pay Penalty rate is 1% per month till you pay fully.
Lastly do not confuse the penalty for failure to pay tax as per notice of adjustment with two other penalty that IRS may impose for under reporting of income -the negligence penalty and the penalty for substantial understatement of your tax liability.