How do you compute IRS tax penalties?

For the individual income taxpayer there are two crucial penalties to be aware of. One is the Failure to File penalty and the other is the Failure to Pay penalty. Both are applied at the same time and can cause a tax liability to grow exponentially leading to severe financial difficulties if not addressed. The Failure to File penalty accumulates at approximately 4.5% per month up to 5 months. This equates to approximately 22.5% over the 5 month timeframe. The Failure to Pay penalty accumulates at approximately 1/2 of 1% per month for up to 50 months. This equates to approsimately 50.25% over a 50 month timeframe. It is worth noting that interest is also computed on top of these penalties. A general rule of thumb is that an IRS tax liability will double every 4.6 to 5.2 years depending on the interest rate which is linked directly to the prime interest rate. The impact of penalties can be minimized by structuring an effective plan of tax resolution. You will find the answer to all of your questions if you seek professional advice.