According to a report, the Internal Revenue Service imposed $7 billion in tax penalties last year—almost four times the $1.8 billion it assessed in 2022 following the Biden administration’s swollen agency ranks.
According to The Wall Street Journal, most of the fines affect those who underpaid their projected quarterly income taxes—business owners, gig workers, investors, and those who do not usually withhold federal income tax payments from their checks.
IRS statistics quoted by the Journal show that the average expected tax penalty in fiscal year 2023 increased from $150 to $500.
Should non-employees underpay their quarterly projections, they risk penalties in the form of an interest penalty.
The penalty rate has also changed from merely 3% in 2021 to 6% in 2022 since interest rates have surged recently.
For the fourth quarter of last year, the rate climbed to 8%. Through the first half of the current fiscal year, the rising pace stayed in force.
San Francisco-based accountant Richard Pon told The Washington Post, “These charges can hit hard, so getting it right can save people hundreds or even thousands of dollars annually.”
While most workers have their pay deducted, some must pay some or all of their federal income tax quarterly.
Monday is the date to send the IRS second-quarter tax payments.
Thanks to stepped-up enforcement made possible by money from the Democrats’ Inflation Reduction Act, which became law in August 2022, tax receipts are predicted to climb by as much as $561 billion from 2024 to 2034.
The Inflation Reduction Act handed the IRS $80 billion in cash. It resulted in hundreds of more employees being hired.
The Treasury Department published a report earlier this year indicating that the IRS is expected to collect hundreds of billions of dollars more in delinquent and unpaid taxes than first projected.
From 2022 to 2031, the tens of billions of increased IRS funds given by the IRA will boost revenues by $180.4 billion, according to estimates made by the Congressional Budget Office.
House Republicans, however, included a $1.4 billion cut to the IRS into the debt ceiling and budget austerity package Congress passed last summer.
If you are one of the millions of Americans who have been impacted by the “penalty bonanza”, contact COTTS LAW – A Tax Resolution Law Firm, at 361-866-3819, or find us online at www.cottslaw.com – and we can discuss your potential option for possible abatement.
