Government shutdown could delay 2019 tax filing season, with refunds affected if it's a long closure
Mileage tax deduction rates for 2019 bumped up a bit

Tax penalties increased for inflation in 2019

Welcome to Part 9 of the ol' blog's 2019 series on tax inflation adjustments. 
Today we look at tax penalties.
You can find links to all 2019 inflation posts
in the 
series' first item: income tax brackets and rates.
Note: The 2019 figures apply to 2019 returns that are due in April 2020.
For comparison purposes, you'll also find 2018 amounts to be used
in filing this year's 2018 tax return due April 15, 2019.

Football official penalty flag
IRS agents don't throw flags like football referees, but the tax agency keeps a close eye out for violation of tax rules and laws and its agents are just as quick to penalize taxpayers and professionals when it spots violations.

To err is human. To collect money on such mistakes is the Internal Revenue Service.

Penalties have long been part of the IRS' effort to get us taxpayers to comply. After all, no one wants to pay Uncle Sam more than absolutely necessary!

Some tax penalties are set by law. Others are adjusted each year because of inflation.

Here's a look at these potential added costs that taxpayers and tax pros alike could face in 2019 if they don't meet tax deadlines or fail to provide adequate services to customers.

Penalties add more to tax bills: Since 2015, the IRS has been relying on some bigger fees for tax tardiness. These penalties also now are subject to annual inflation-based tweaks.

For the 2019 tax year, if you fail to file a tax return within 60 days after it's due in 2020 (including extension time), you'll face an added penalty charge of $215 or 100 percent of the amount of tax due, whichever is less.

That's the same amount as the 2018 penalty for not filing on time.

Business filers also must file in a timely manner or pay more. Failure to file a 2019 partnership or S corporation return in 2019 will result in a penalty of $205. That's a $5 hike from the 2018 fee amount.

Tax pros, too: Since so many of us pay for help with our filing, Uncle Sam assesses penalties on tax pros, too, if they if they knowingly understate a client's tax liability.

In situations where a tax preparer comes up with a filer's tax due that is less than it should be and the reason is because of what the IRS deems is an "unreasonable position," the tax preparer could be hit with a penalty of $1,000 or 50 percent of the payment the preparer got for filing the return, whichever is greater.

Where a tax preparer promotes what the IRS deems is an abusive tax shelter, that penalty is generally equal to $1,000 for each organization or sale of an abusive plan or arrangement or, if the scheme is less than that, 100 percent of the income derived from the activity.

If a tax preparer uses, in the IRS' estimation, willful or reckless conduct to get the taxpayer's liability to an amount lower than it should be, the penalty increases to the greater of $5,000 or 50 percent of the income from the return or claim for refund.

And if a tax pro is found guilty of making fraudulent or false claims, this felony could produce a fine of up to $100,000 ($500,000 in the case of a corporation), imprisonment of up to three years or both, along with paying the costs of prosecution.

The IRS goal in whacking tax pros for bad action when it comes to clients is, of course, to discourage the use of tax strategies that a preparer knew, or reasonably should have known, were not realistic. And to get the correct amount of tax due from filers.

These amounts are set by statute and not subject to annual inflation adjustments.

More tax preparer penalties: In addition to the penalties for understating clients' tax bills, there's a variety of other fines, adjusted annually for inflation, that a tax preparer could face for failing to complete a variety of other tasks.

The 2019 amounts are:

Tax Preparer Action 

Penalty per Return
or Refund Claim

Maximum Penalty
in a Calendar Year

Fails to furnish a client with a copy of his/her return.



Fails to sign return. When a preparer is paid to do taxes, he/she must sign the client's Form 1040.



Fails to furnish identifying number. This goes along with the signature mandate.



Fails to retain a copy of the return or other filing list.



Fails to file correct information returns. 

$50 per return 
and item in return


Negotiates of a taxpayer's check. This is a fine for a preparer who receives a taxpayer's refund check, endorses it and deposits it as a third-party check, even if the preparer and taxpayer have agreed to the process. Basically, the check negotiation fine is aimed at return preparers who charge based on taxpayer refund amounts.

$530** per check 

No Limit

Fails to be diligent in determining a filer's eligibility for the American opportunity tax credit, the child tax credit, and/or the Earned Income Tax Credit (EITC).

$530** per check

No Limit

*Increase of $500 from the 2018 maximum penalty amount
**Increase of $10 from the  2018 maximum penalty amount

Passport revocation: Finally, if you're an international traveler, make sure you pay your taxes, especially if you owe a lot.

The Fixing America's Surface Transportation Act, or FAST Act, that became law in December 2015 included a provision that authorizes the State Department to revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt.

When this tax law took effect in 2016, the document revocation trigger was $50,000 in unpaid taxes. Each subsequent tax year, the IRS has the option to adjust this amount upward if inflation allows.

For the 2019, you can have your passport pulled if you owe $52,000 or more. That's $1,000 more than this year's overdue tax amount of $51,000 that will cause revocation or denial of issuance of your passport.

Whether you're a taxpayer handling your taxes on your own or a tax preparer, make sure you get the filings right and right on time (or sooner!) or you'll end up paying the U.S. Treasury more in penalties.





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