Three Major IRS Penalties and How to Avoid Them

Three Major Penalties to Avoid

·        Failure to File – Applies from the original due date of the return without regard to extension until you file your return.

o   5% of unpaid taxes each month up to 25% of the unpaid balance

·        Failure to Pay – Applies from the original due date of the return until you pay your taxes

o   .5% of the unpaid taxes each month up to 25% of the unpaid balance.

·        Underpayment of Estimated Taxes

o   This penalty is calculated based on the period in which the estimate applies. The IRS will use the tax liability reported on your most recent tax return from a prior year or your current return filed on or before the due date.

o   If you paid the lesser of 90% of the previous year return balance or 100% of the current year balance, you may avoid any underpayment penalties. If your adjusted gross income for the previous year was over $150,000, you are required to pay at least 90% of the current year taxes or 110% of previous year taxes, whichever is less.

Important Dates For Your Estimated Taxes

·        April 15th (January 1 – March 31) - Voucher 1

·        June 15th (April 1 – May 31) - Voucher 2

·        September 15th (June 1 – August 31) - Voucher 3

·        January 15th of the following year (September 1 – December 31) - Voucher 4

There is some relief offered by the IRS. They may grant you a one-time penalty abatement pending you have shown good tax compliance for the previous 3 years.

Internal Revenue Service Penalty Relief

How I can help?

If you feel your tax situation will change in the upcoming year, I can prepare a tax estimate for you based on anticipated changes in your tax obligation.

I can also help you get set up on a payment plan to avoid any future notices sent if you are currently dealing with a balance due.

Internal Revenue Service Summary of Penalties

Disclaimer: The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Jeffrey Kurtz CPA LLC to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact Jeffrey Kurtz CPA LLC prior to taking any action based upon this information. Jeffrey Kurtz CPA LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.