Get the facts about late filing and late-payment penalties

The annual deadline to file and pay your taxes is here. By law, the IRS may assess taxpayers penalties for both failing to file a tax return and for failing to pay taxes they owe by the deadline. If you are unable to complete your tax return on time, you can get more time to file your return. Ask your Enrolled Agent to help you file an extension or try and request an automatic six-month extension online. Here are seven important points about penalties for filing or paying late:

1.) If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date. You can mail in a check or money order Post-marked by the deadline – or try out the New IRS Direct Pay at irs.gov. You can make a payment directly from your checking or savings account if giving the IRS digital access to your banking information doesn’t mess with your sleep patterns.

2.) You can reduce additional interest and penalties by paying as much as you can with your tax return. Contact us today and we can go over what options you have as far as setting up an installment agreement. The more you pay in the less you are exposed to the monthly penalties the IRS will charge on your balance.  If you are currently on an Installment agreement for a prior year balance – owing more unpaid tax is against the terms of the prior agreement. Contact us today to see if you qualify for a reinstatement or what other options you may have – (844)208-7408.

3.) The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will grow to 25 percent of your unpaid taxes.

4.) If you do not pay your taxes by the tax deadline, normally you will face a failure to-pay penalty of one-half of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.  Once the IRS sends out a Notice of Intent to collect of any kind – LT-11, CP-90, CP-504, LT-1058, CP-523, you Penalty rate can increase to 1 percent per month.

5.) If both the 5 percent failure-to-file penalty and the one-half percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent.

6.) If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

7.) You will not have to pay a late-filing or late-payment penalty if you show reasonable cause for not filing or paying on time.  Unfortunately the people at the IRS hold the final say in what is reasonable cause, and they do not have the best history when it comes to being reasonable themselves. Contact Us today to go over your situation and see whether you qualify for abatement of penalties.

 

Some people can get more time to file without having to ask for an extension. They include: 

  • US citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file. However, tax payments are still due by the April filing date.
  • Members of the military and others serving in Afghanistan or other combat zone localities generally can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3, Armed Forces’ Tax Guide.

For more information about penalty and interest charges, refer to Part One, Chapter 1, Filing Information, of Publication 17, Your Federal Income Tax for Individuals – or Contact Us today. We handle the Time and Trouble that is dealing with the IRS.