David Wancura

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July 5th, 2012

Failure to File or Pay Penalties

Uncategorized, by nicholeharms.

Failure to
File or Pay Penalties: Eight Facts

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.

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