Penalties & Collections

Doubt as to Collectibility — assets and future income won't cover the debt Doubt as to Liability — genuine dispute about whether the tax is owed Effective Tax Administration — exceptional circumstances where collection would be unfair

Guaranteed — assessed tax of $10,000 or less; taxpayer cannot pay immediately, has five years of filing/payment compliance, had no IA in that period, and will pay within 3 years Streamlined — total balance of $50,000 or less; generally 72 months or the remaining collection period, whichever is shorter, without financial disclosure Non-streamlined — balance over $50,000 generally requires financial disclosure (Form 433-A or 433-F)

100% of withheld trust fund taxes not remitted. Applies to any responsible person who willfully fails to pay. Joint and several liability.

20% on underpayment due to negligence, substantial understatement (greater of 10% of tax or $5,000), or substantial valuation misstatement 40% for gross valuation misstatements

75% the underpayment attributable to fraud. IRS must prove fraud by clear and convincing evidence.

5% per month of unpaid tax, maximum 25%. Minimum penalty for returns over 60 days late is the lesser of $525 or 100% of the tax due (2025).

0.5% per month of unpaid tax, maximum 25%. Combined with failure-to-file, the total monthly cap is 5%.

IRS hardship designation that temporarily suspends collection when taxpayer cannot pay basic living expenses and tax debt. Interest and penalties continue to accrue. CSED continues to run.

IRS generally has 10 years from the date of assessment to collect a tax liability. After the CSED, the debt is legally uncollectible.

$1,000 or 50% of preparer's fee (whichever greater) for understatements due to unreasonable positions $5,000 or 75% of fee for willful or reckless conduct

Hearing before IRS Appeals requested within 30 days of a final levy notice or Notice of Federal Tax Lien (via Form 12153). Taxpayer can challenge collection, propose alternatives (OIC, installment agreement, CNC), and seek Tax Court review.

Assessment of tax Notice and Demand (CP501 series) Federal Tax Lien — automatic by law, Notice of Federal Tax Lien publicly filed Levy — IRS seizes property after 30-day notice (Form CP504 or LT11) CDP Hearing available via Form 12153

For statements required in 2026: $60 per statement if corrected within 30 days, $130 if corrected after 30 days through August 1, and $340 if corrected after August 1 or not corrected. Sections 6721 and 6722 may apply separately.

$5,000 for filing a return that does not include enough information to judge the correct tax or contains substantially incorrect information due to a frivolous position

return personally prepared and signed before revenue agents before customer service representatives before Taxpayer Advocate Service not before Appeals not before collection officers not before IRS Counsel

$650 per failure up to $2,600 on one return covering all four due-diligence categories no annual aggregate cap

10 years from assessment active installment agreement does not suspend the period currently not collectible status does not suspend the period

CDP generally requested within 30 days CDP determination may be reviewed by Tax Court CAP is generally faster CAP decision has no Tax Court review