In recent years, electronic filing and payment options have increased the timeliness and accuracy of tax returns and reduced the burden on taxpayers. However, the law provides that the IRS can assess a penalty on taxpayers who fail to file on time, fail to pay on time or both. Below are some important points about the two different penalties.
1. If a tax return is not filed by the due date ( or extended due date) a failure to file penalty will be assessed. If the amount due is not paid by the due date, a failure to pay penalty will be assessed.
2. The failure to file penalty is generally more than the failure to pay penalty. So, if a taxpayer cannot pay all the tax owed, a return should still be filled along with any partial payment. A taxpayer can then consider other payment options.
3. The penalty for filing late is usually five percent of the unpaid balance for each month or part month the return is late. The penalty will not exceed 25 percent of the unpaid tax balance.
4. If a return is filed more than 60 days after the due date or extended due date, the minimum penalty is the lessor of $135 or 100 percent of the unpaid tax.
5. If payment is not made by the due date, a failure to pay penalty will be assessed. This penalty is on e half of one percent of the unpaid balance per month or part month after the due date. The penalty will not exceed 25 percent of the unpaid balance.
6. If an extension is filed by the original tax deadline, and at least 90 percent of the actual tax liability is paid by the original due date, a failure to pay penalty will not be assessed if the remaining balance is paid by the extended due date.
7. If both the failure to file and failure to pay penalty apply in any month, the five percent failure to file penalty is reduced by the failure to pay penalty. However, i9f a tax return is filed more than 60 days after the due date or extended due date, the minimum penalty is the lessor of $135 or 100 percent of the unpaid tax.
8. Either penalty may be reduced or eliminated if a taxpayer can show that the failure to file or pay on time was due to a reasonable cause and willful neglect.
If you have not filed your tax return yet, don’t delay. Contact us so your returns can be timely filed. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
