Tax Payment Failure? Check Consequences and Relief Plans for IRS and FTB

On: April 10, 2025

All citizens and business entities need to fulfill their obligation to tax authorities. Due to tax obligation non-compliance, multiple tax agencies, including the Internal Revenue Service (IRS), Franchise Tax Board (FTB), and California Department of Tax and Fee Administration (CDTFA), will impose significant penalties.

People who want to handle financial liabilities and maintain good relationships with tax agencies should know about tax penalties and relief programs. There are attorneys for IRS taxes who can help with the following problems a person might face due to non-compliance.

Penalties and Relief Mechanisms for IRS

When it comes to failure in tax payments or filing the proper tax documents, the IRS charges several penalties at the federal level to individuals or companies.

• Failure in Tax Payment: The Internal Revenue Service levies this penalty against taxpayers who fail to file their tax returns before the deadline. Underpayment penalties equal to 5% of unpaid taxes apply per month that tax filings are delayed with a maximum possible amount of 25%. ​
• Failure to Pay Within Due Date: Penalties at 0.5% of unpaid taxes apply to unpaid taxes during months of non-payment, although this penalty has a 25% maximum rate.
• Penalties Related to Accuracies: Negative penalties emerge when taxpayers do not comply with federal tax rules by chance or intentionally ignore the regulations and equal 20% of the underpaid amount.

The IRS provides several relief options for penalties:

• Show of Cause Relief: This penalty becomes available for taxpayers who demonstrate that their non-compliance stemmed from acceptable causes, excluding deliberate carelessness.
• First-Time Abatement of Penalty: This penalty relief temporarily assists taxpaying individuals who maintain an unperturbed tax record for one occasion. The provision extends to penalty obligations, including failure to file, failure to pay, and failure to deposit penalties.

Penalties and Relief Program of FTB

Regarding FTB, the personal income tax and corporate taxes become subject to penalties if it has irregularities regarding maintaining the authority’s guidelines.

• Failure to File: Taxpayers who submit their tax return late must pay a penalty that covers 5% of the unpaid tax amount and 0.5% each month up to a maximum of 25% of the unpaid tax.
• Payment Failure: The penalty system consists of 5% of unpaid tax automatically increased by 0.5% for every month that tax remains overdue until it reaches 25%.

The One-Time Penalty Abatement program became available to taxpayers through FTB starting from tax years beginning January 1st, 2022. Eligible individual taxpayers under the program can receive one-time penalty relief if they fulfill particular conditions through this initiative.

• Compliance with all tax return filing requirements.​
• Individuals who did not utilize the abatement provision under R&TC Section 19132.5 are eligible to apply.​
• Open taxpayers can exclude penalties from the list of outstanding liabilities and maintain an active installment agreement in good standing.

Now, in all these matters, a lawyer with expertise in IRS tax laws and the FTB can help clients who seek a permanent solution to their tax issues. These tax complexities can become an issue if one doesn’t pay close attention to the tax notices and guidelines. Therefore, it’s recommended to take an expert’s suggestion before making any final decision related to taxes.