The Internal Revenue Service which is responsible for the collection of taxes also initiates penalties at the Federal level. The imposition of penalties which have been specified in the Federal Tax law is the responsibility of the IRS. Out of the many types of penalties that apply to the tax payers in various situations, the late tax payment penalty and under estimation of taxes are some.
The law requires taxpayers to either withhold tax or make estimated payments of tax on a quarterly basis before the tax year ends. In case a taxpayer fails to pay the taxes within the stipulated time, a penalty is charged by the IRS. This situation has two scenarios; either the complete amount of taxes was not paid off before the due date or only a partial amount was paid. In both the cases, a penalty of 0.5% is charged on the amount which remains unpaid.
The penalty is charged on a monthly basis and continues until the taxpayer has paid 25 percent of the amount in the form of fine. The sooner the unpaid taxes are paid off, the lesser the penalties are charged.
Apart from late payment, the IRS also penalizes the taxpayer for under estimated payment of taxes in the form of monetary fines. Taxpayers are very likely to under estimate the amount that is due since an accurate estimation is required and chances of an error are high. In such cases, where the taxpayer pays very less estimated tax or has with held low amount as taxes with him, an interest is charged. The interest is charged on the amount which was to be paid as taxes according to the accurate calculations but was under estimated. The rate of interest was the year 2009 was 4%. It should also be noted that if the taxes are under estimated and are paid late at the same time, the interest as well as the penalties mentioned above are charged to the taxpayer.