Question

If a business operates without paying taxes, what possible irs business tax penalties does it face?

Answer

A business that failed to file and paid no taxes by its return’s due date is subject to:

  • Penalties
  • Late-filing penalty
  • Late-payment penalty
  • Interest

These will apply until the business owner pays the balance of the business taxes. If the IRS determines that fraud is involved, a business owner will be subject to:

  • Non-payment penalties and additional fines
  • Sanctions
  • Possible criminal prosecution with jail time

Also, if a business has employees and doesn’t pay payroll taxes, it might be subject to the trust fund recovery payment. This is a 100% penalty that can be assessed against any person in the employer’s business who:

  • Is responsible for collecting, accounting for, and paying withheld employment taxes
  • Willfully fails to collect or pay these taxes

Related Topics

Related Resources

Insolvency

You are considered insolvent if you owe more than the value of your assets. This can be important if you received IRS Form 1099-C, Cancellation of Debt.

IRS Notice CP518B – You Didn’t File a Tax Return

Learn more about notice CP518B and how to handle an unfiled business tax return with help from the tax experts at H&R Block.

IRS Letter 4552C – Payer Inquiry

Learn more about IRS Letter 4552C and how to handle an inquiry of your business' income with help from the tax experts at H&R Block.

What Are the Tax Brackets?

What are the tax brackets for U.S. taxes? Review income tax brackets based on your filing status and taxable income and understand how they apply to you.