The IRS Assesses Failure to File and Failure to Pay Penalties
And as time goes by the IRS adds salt to your wounds by adding penalties to what you already owe. It’s like the meter in a Taxi Cab, the counter keeps going adding more and more charges to that IRS Debt—even when you are standing still. Many times the penalties and interest end up adding to be more than what you actually owe the IRS
The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns. When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.
Here are eight important points about the two different penalties you may face if you file or pay late.
1 – If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.
2 – The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. The IRS will work with you.
3 – The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty 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 is the smaller of $135 or 100 percent of the unpaid tax.
5 – If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
6 – If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.
7 – If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, 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.
8 – You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.
If I Can’t Afford to Pay My Taxes Why do They Keep Adding Penalties?
The IRS doesn’t like being ignored so this is how they get your attention. They want to be sure you know they are not going away. It’s like they haunt you with their ongoing letters. If you don’t respond to them the penalties they tack is like a club they keep hitting you over the head with. Penalties are just the beginning of what they can do to your life.
Is There Anything I Can Do To Get My Life Back?
Yes there is! You can get your life back. First you have to decide that you want your life back. You have to decide that you aren’t going to take this anymore and that you want to fix it. Once you make the decision that you want help, and you no longer want to live in fear, or hide from those dreaded IRS notices, phone calls and visits—you will have taken the biggest step in getting your life back on track. Don’t let the IRS bully you into hiding under a rock, in the closet, or under your blankets. There are many options and ways to get your life back—and even better yet, there’s a way to protect your savings and your paycheck, a way for you to keep your car!