8 Facts About Penalties for Failure To Pay Taxes

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 failure to file taxes, failure to pay taxes or both.

 

Here are eight important points about the two different penalties you may face for failure to file taxes or failure to pay taxes.

    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.

You can e-file your extension request through TurboTax.

  1.  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.
  2.  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.
  3.  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.
identity theft

Nine Things You Should Know about Tax Penalties

The tax filing deadline is approaching. If you don’t file your return and pay your tax by the due date you may have to pay a penalty.

 

Nine Things You Should Know about Tax Penalties

Here are nine things you should know about the two different penalties you may face if you do not pay or file your taxes on time.

  1. If you do not file by the deadline, you might face a failure-to-file penalty.
  2. If you do not pay by the due date, you could face a failure-to-pay penalty.
  3. 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 and explore other payment options in the meantime.
  4. 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.
  5. 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.
  6. You will 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.
  7. If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.
  8. 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% of the unpaid tax.
  9. 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.

Link: Avoiding Penalties and the Tax Gap

Failure to Pay Child Support, Federal Non–Tax and State Income Tax Obligations

The Department of Treasury’s Financial Management Service (FMS), which issues IRS tax refunds, has been authorized by Congress to conduct the Treasury Offset Program.

Your refund or overpayment may be reduced by BFS and offset to pay:

  • Past-due child support;
  • Federal agency non-tax debts;
  • State income tax obligations; or
  • Certain unemployment compensation debts owed to a state. (Generally, these are debts for (1) compensation that was paid due to fraud, or (2) for contributions owing to a state fund that were not paid due to fraud).

 

Failure to Pay Child Support, Federal Non–Tax and State Income Tax Obligations

The Treasury Offset Program is a centralized offset program, administered by the Bureau of the Fiscal Service’s Debt Management Services (DMS), to collect delinquent debts owed to federal agencies and states (including past-due child support), in accordance with 26 U.S.C. § 6402(d) (collection of debts owed to federal agencies), 31 U.S.C. § 3720A (reduction of tax refund by amount of the debts), and other applicable laws.

 

Contacting FMS

You can contact the agency with which you have a debt, to determine if your debt was submitted for a tax refund offset. If your debt was submitted for offset, FMS will take as much of your refund as is needed to pay off the debt and send it to the agency you owe. Any portion of your refund remaining after offset will be issued in a check to you or direct deposited for you.

FMS will send you a notice if an offset occurs. The notice will reflect the original refund amount, your offset amount, the agency receiving the payment, and the address and telephone number of the agency. FMS will notify the IRS of the amount taken from your refund. Contact the agency shown on the notice if you believe you do not owe the debt or you are disputing the amount taken from your refund. If a notice is not received contact 800–304–3107 or TDD 866–297–0517. The available hours are Monday through Friday 7:30AM to 5:00PM CT. Spanish speaking assistors are available Monday through Friday 12:30PM to 5:00PM CT. Contact the IRS only if your original refund amount shown on the FMS offset notice differs from the refund amount shown on your tax return.

If you filed a joint return and you’re not responsible for the debt, but you are entitled to a portion of the refund you may request your portion of the refund by filing Form 8379 (PDF), Injured Spouse Allocation. Attach Form 8379 to your original Form 1040 (PDF), Form 1040A (PDF), or Form 1040EZ (PDF) or file it by itself after you are notified of an offset. If you file a Form 8379 with your return, write “INJURED SPOUSE” at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs. If you file Form 8379 with your original return, it may take 11 weeks for Electronic Filed returns or up to 14 weeks from the date of filing if you file a paper return, to process your return.

 

Filing Form 8379

If you are filing Form 8379 by itself, it must show both spouses’ social security numbers in the same order as they appeared on your income tax return. You, the “injured” spouse, must sign the form. Follow the instructions on Form 8379 carefully and be sure to attach the required forms to avoid delays. Do not attach the previously filed Form 1040 to the Form 8379. Send Form 8379 to the Service Center where you filed your original return. Allow at least 8 weeks for IRS to process your allocation request. We will compute the injured spouse’s share of the joint return for you. If you lived in a community property state during the tax year, we will divide the joint refund based upon state law. For additional information, FMS can be reached at 800–304–3107.