April 15 is the tax day deadline for most people. If you’re
due a refund there’s no penalty if you file a late tax return. But if you owe
taxes and you fail to file and pay on time, you’ll usually owe interest and
penalties on the taxes you pay late. Here are eight facts that you should know
about these penalties.
1.
If you file late and
owe federal taxes, two penalties may apply. The first is a failure-to-file
penalty for late filing. The second is a failure-to-pay penalty for paying
late.
2.
The failure-to-file
penalty is usually much more than the failure-to-pay penalty. In most cases,
it’s 10 times more, so if you can’t pay what you owe by the due date, you
should still file your tax return on time and pay as much as you can. You
should try other option to pay, such as getting a loan or paying by credit
card. The IRS will work with you to help you resolve your tax debt. Most people
can set up a payment plan with the IRS using the online payment Agreement tool on
IRS.gov.
3.
The failure-to-file
penalty is normally 5 percent of the unpaid taxes for each month or part of a
month that a tax return is late. It will not exceed 25 percent of your unpaid
taxes.
4.
If you file your
return more than 60 days after the due date or extended due date, the minimum penalty
for late filing is the smaller of $135 or 100 percent of the unpaid tax.
5.
The failure-to-pay
penalty is generally 0.5 percent per month of your unpaid taxes. It applies for
each month or part of a month your taxes remain unpaid and starts accruing the
day after taxes are due. It can build up to as much as 25 percent of your
unpaid taxes.
6.
If the 5 percent
failure-to-file penalty and the 0.5 percent failure-to-pay penalty both apply
in any month, the maximum penalty amount charged for that month is 5 percent.
7.
If you requested an
extension of time to file your income tax return by the tax due date and paid
at least 90 percent of the taxes you owe, you may not face a failure-to-pay
penalty. However, you must pay the remaining balance by the extended due date.
You will owe interest on any taxes you pay after the April 15 due date.
8. You will not have to pay a failure-to-file or
failure-to-pay penalty if you can show reasonable cause for not filing or
paying on time.
Iddi Sandaly, CPA , MBA
Seruwage Consulting and CPAs
www.seruwagecpas.com
Seruwage Consulting and CPAs
www.seruwagecpas.com
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