I'm not trying to scare you (it was slightly fun to look this up) -- just trying to provide information for whatever decision you make on your taxes. Doing a very quick search on IRS audit penalties for underpayment, I found this on IRS.gov:
- Generally, interest accrues on any unpaid tax from the due date of the return until the date of payment in full. The interest rate is determined quarterly and is the federal short-term rate plus 3 percent. Interest compounds daily. Visit Newsroom Search for the current quarterly interest rate on underpayments.
- In addition, if you file a return but don't pay all tax owed on time, you'll generally have to pay a late payment penalty. The failure-to-pay penalty is one-half of one percent for each month, or part of a month, up to a maximum of 25%, of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full. The one-half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy property. If you file your return by its due date and request an installment agreement, the one-half of one percent rate decreases to one-quarter of one percent for any month in which an installment agreement is in effect. Be aware that the IRS applies payments to the tax first, then any penalty, then to interest. Any penalty amount that appears on your bill is generally the total amount of the penalty up to the date of the notice, not the penalty amount charged each month. See Topic No. 202 for information about payment options.
Let's assume you electronically file in April and get the $7500 tax credit soon after. Woohoo! Excellent! I don't know the audit chances, but let's just assume you get a letter in August that says you have been flagged for an audit. You go to your audit in October and the less-than-friend IRS agent says with a frowny face:
1. Nice try.
2. You owe the IRS that $7500 you tried to claim:
$7,500
3. It gets better. You owe the IRS interest for your underpayment, which for 4th quarter 2022 is 6% compounded daily. There is a formula to calculate daily interest compounding, but I don't want to look it up and let's keep it simple. $7500 * 6% / 12 months * 6 months =
$225 (the actual amount will be larger)
4. And to make your day even better, you owe the IRS a failure-to-pay penalty of 0.5% for each month. $7500 * 0.5% * 6 months =
$225
5. You might get a satisfaction survey in the mail, please rate your not-so-friendly IRS agent 0 stars because our bosses don't like it when the tax payers like us.
So assuming the IRS rules that the Solterra does not qualify for the tax credit, anyone who tries to claim it and gets caught will owe the original $7500 plus at least $450 in interest and penalties.
