Penalty for ignorance of IRS tax law?
Q.I am just getting into real estate and home business. If I decide to do taxes myself and I get audited, what is the penalty I will face for not paying taxes I may owe (due to ignorance/ lack of experience with understanding a tax law?) Do I just pay the tax plus interest back? Or is the IRS going to send me to jail?
A.Probably not jail unless you make extremely obvious "errors" and/or otherwise impede the collection of the tax. Mostly what will happen, is the additional tax is assessed, plus interest and penalties, which can add up to a substantial number over time. You should use the services of a decent tax accountant (CPA or EA) in your area so you capture the deductions you need, and stay out of the hot water with the feds and your state/local tax agencies. Just pay the tax and let them bill you for the interest and any penalties. Not to worry about jail. Now for the commercial. Hie thee to a local competent Enrolled Agent (EA) or Certified Public Accountant - either a CPA or PA, and let him guide you through the tax maze at least for the first year. Money well spent, and tax deductible. And you'll learn a lot, believe me.
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