What You Must Know About Tax - Penalties

True strategic tax planning is a necessity and it generally creates a quantifiable bill for consumers

. As non-payment or delay of taxes can result in penalties, effective tax planning has become a crucial part of financial success in businesses today. There are fixed deadlines for filing various tax returns and penalties for missing these deadlines. If you owe taxes, the Internal Revenue Service will calculate penalties and interest on the amount owed. When it comes to filing a tax return or not filing one the IRS can assess a penalty if you fail to file, fail to pay or both.

Heres what you must know about the different penalties you may face if you do not file or pay timely.

* Nonpayment of taxes by the due date could bring on a failure-to-pay penalty, while failure to file by the given deadline results in a failure-to-file penalty.

* Even if one cannot pay all the taxed owed, one must still file tax returns on time and explore other payment options, as the failure-to-file penalty is generally more than the failure-to-pay penalty.

* While 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 does not exceed 25 percent of ones unpaid taxes.

* The minimum penalty is the smaller of $135 or 100 percent of the unpaid tax, if you file your return more than 60 days after the due date or extended due date.

* Nonpayment of taxes by the due date would result in a penalty of of 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 ones unpaid taxes.

* Timely filing a request for an extension of time to file and paying at least 90 percent of ones actual tax liability by the original due date, will ensure that there is no failure-to-pay penalty if the remaining balance is paid by the extended due date.

* In case the failure-to-file penalty and the failure-to-pay penalty is applicable in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if the returns are filed more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

* It is not necessary to pay a failure-to-file or failure-to-pay penalty if one can prove that the failure to pay or file on time was because of reasonable cause and not willful neglect.

Work with a knowledgeable tax professional who can help you meet your filing obligations and avoid penalties. Qualified tax consultants can help expand your business by estimating the taxes appropriately and provide you with solutions to arrange your finances in the best possible manner. Pay the tax on time, even if this means requesting an installment payment agreement on Form 9465.

by: Gladeyas

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