Basics of IRS Penalties
IRS penalties and interest may be for a number of different occurrences. Some examples are: understating your tax liability, understating a reportable transaction, file an erroneous claim for a refund or credit, or file a frivolous tax submission. But the easiest way to receive a penalty is by filing late.
When it comes to penalties and interest, the Internal Revenue Code may impose many different types of penalties. These can be as simple as a civil fine, or as harsh as imprisonment, depending on the particular scenario.
How IRS Penalties Are Calculated
Penalty for Filing Late: If a return is not filed by the due date, you may have to pay a failure-to-file penalty. This amount is typically 5% per month, but not greater than 25%. The penalty is based on the unpaid amount as of the due date.
Penalty for Paying Late: The Failure-to-Pay Penalty of .5% of unpaid taxes per Month is incurred each month after taxes due are not paid.
NOTE: If there is no tax balance due (or you qualify for a refund) there will be no penalty for late filing.
Out of Country: Individuals who live and work out of the country automatically receive a two month extension without filing a Form 4868. However, a return must be filed by October 15 at the latest.
Reasonable Cause: The IRS does also waive penalties for those individuals and businesses that had Reasonable Cause to not file or pay on time. This is a more subjective reason to be reserved for the most extreme circumstances, and to be determined by the IRS.
Extend Your Deadline using form 4868: An individual or business may elect to file for an extension of up to 6 months using form 4868. This is not an extension of time to pay; this is an extension of time to file.
Obviously the best way to avoid penalties and interest is to simply file on time! However, sometimes this is easier said than done. There are many different services available for use by individuals and businesses to extend filing deadlines ExpressExtension.com is a simple online tool that can help you avoid late penalties by filing for an extension.
If you have any questions about filing Tax Extensions, you can call, email or chat online with the Express Tax Support Center in Rock Hill, SC at 803-514-5155 between the hours of 8am – 6pm EST, Monday through Friday or email support@ExpressExtension.com. We have Spanish Support too!