We all know how important it is to file our taxes with the IRS on time. But, if for some reason you don’t, are you aware of the specific types of penalties you could face if you do not file them in time and don’t file for a tax extension? You could be on the hook for owing significantly more money to Uncle Sam than you would by meeting all of your tax-filing deadlines.
A Breakdown of IRS Penalties
A failure-to-file penalty is generally levied on taxpayers who do not file their taxes by a specific hard deadline, such as April 15th or even certain quarterly deadlines for business taxes and estimated tax payments that small business owners must file. If you don’t pay the IRS what you owe in taxes by the deadline on which they are due, you could face a failure-to-pay penalty.
How Much These Penalties May Cost You
In most scenarios, the failure-to-file penalty is a larger financial penalty compared to the failure-to-pay penalty. This is why if you’re unable to pay your entire tax bill for any reason, you should still file your return on time and pay Uncle Sam as much of this amount as you can. You would then be able to explore alternative payment methods to ensure the IRS receives its requested amount.
Generally speaking, the penalty for filing your taxes after the deadline by which they are due is 5% of the unpaid tax bill for each month or for part of a month that a tax return is late. The rule is that this penalty cannot exceed 25% of all unpaid taxes for one taxpayer. If you get your return to the IRS more than 60 days after the original deadline or an extended deadline, the minimum failure-to-file penalty is 100% of the unpaid tax amount or $135, depending on which amount is less. If you don’t pay your taxes by the date they are due, you’ll likely owe a failure-to-pay penalty of 0.5% of your unpaid taxes for every month or part of a month that goes by after the tax deadline at-hand has passed. But it’s important to remember that this penalty can be as much as 25% of your unpaid tax amount.
Just like exceptions to certain rules in all areas of our society, there is some good news with regard to these IRS penalties for taxpayers who are in certain situations. You don’t have to pay failure-to-file or failure-to-pay penalties if you prove to the IRS that you did not file or pay due to a reasonable cause and not because you simply did not want to do so. Tax-filing extensions are also very beneficial to those under circumstances that prevent them from filing or paying their taxes on time.
The goal for all individuals and business owners who owe taxes is to get them filed with the IRS and paid when they are due. If you need tax filing and preparation assistance to avoid all of these potential penalties on both personal and business taxes, turn to the accounting experts at 1-800Accountant. Learn more by checking out the “Services” page on www.1-800Accountant, or call 1-800-222-6868 today.