How does IRS Communicate Tax Penalties

[horadricCube]

I don't have any tax penalties, I just have questions regarding how the IRS provides notification of tax penalties. I had an overcontribution this past year that I caught and corrected, but it lead me to wonder how it would have been communicated had I not noticed and done nothing.

For example, say you incur a penalty as a result of a retirement overcontribution, but you also overpay your taxes that year and are issued a refund. Does the IRS just reduce your refund and not say anything, or do they reduce your refund and send you a notification? Or some other method?

Another question, let's say you had a overcontribution in a previous year, and the penalty applies each year until the excess is withdrawn. Will they provide a notification each year until the excess is withdrawn, or do they only notify once?

Last questions, how would I find past records/information about past tax penalties, and more importantly past correspondance (records of letters, etc.) sent by the IRS. I was hoping to find there was a way to view sent letters/correspondance online but did not find anything about this being possible. I spoke to the IRS about this regarding penalties specifically and they said would be in the online account transcript and check the penalty section for each transcript, which from my understanding would just be a dollar value with no explanation.

[pizzy]

I don't have any tax penalties, I just have questions regarding how the IRS provides notification of tax penalties. I had an overcontribution this past year that I caught and corrected, but it lead me to wonder how it would have been communicated had I not noticed and done nothing.

For example, say you incur a penalty as a result of a retirement overcontribution, but you also overpay your taxes that year and are issued a refund. Does the IRS just reduce your refund and not say anything, or do they reduce your refund and send you a notification? Or some other method?

Another question, let's say you had a overcontribution in a previous year, and the penalty applies each year until the excess is withdrawn. Will they provide a notification each year until the excess is withdrawn, or do they only notify once?

Last questions, how would I find past records/information about past tax penalties, and more importantly past correspondance (records of letters, etc.) sent by the IRS. I was hoping to find there was a way to view sent letters/correspondance online but did not find anything about this being possible. I spoke to the IRS about this regarding penalties specifically and they said would be in the online account transcript and check the penalty section for each transcript, which from my understanding would just be a dollar value with no explanation.

They send a letter.

[MarkNYC]

The answers can vary depending on which specific type of penalty you're asking about.

[horadricCube]

The answers can vary depending on which specific type of penalty you're asking about.

An example case would be an HSA overcontribution that is not withdraw/corrected for multiple years - thus I would have to pay the "excise tax" penalty each year. Maybe I never recieve the initial letter about it so it does not get corrected after the initial notice/letter. Would they notify me each year it remains uncorrected?

[pizzy]

The answers can vary depending on which specific type of penalty you're asking about.

An example case would be an HSA overcontribution that is not withdraw/corrected for multiple years - thus I would have to pay the "excise tax" penalty each year. Maybe I never recieve the initial letter about it so it does not get corrected after the initial notice/letter. Would they notify me each year it remains uncorrected?

IRS letters for tax issues aren’t one and done.

[MarkNYC]

The answers can vary depending on which specific type of penalty you're asking about.

An example case would be an HSA overcontribution that is not withdraw/corrected for multiple years - thus I would have to pay the "excise tax" penalty each year. Maybe I never recieve the initial letter about it so it does not get corrected after the initial notice/letter. Would they notify me each year it remains uncorrected?

I have never seen or heard of the IRS proactively assessing the 6% annual penalty for an excess contribution to a traditional IRA, Roth IRA, or HSA. If it ever happens, it is rare as opposed to their normal procedure.

[Tom_T]

They send a letter.

And the letter might be three years after the return was filed.

[Radman]

It depends. However, for HSAs as you mentioned or an IRA you would just report the overage on form 5329 and it would calculate your 6% excise tax. They wouldn’t send you anything.

[enad]

If you are doing your taxes electronically, the tax program will let you know of a penalty, otherwise if you get audited (sometimes it's just a letter in the mail, other times it's a big deal)