IRS Penalties For Filing Or Paying Taxes Late - A Practical Guide

IRS Penalties For Filing Or Paying Taxes Late - A Practical Guide. The IRS has a slew of various tax penalties applied to taxpayers' accounts in its arsenal.

So as taxpayers, why are we penalized? How does it happen? And how may we avoid this in the future?

These are great questions; here are some basic examples of how you can get in trouble with the tax law:

failure to pay
failure to file
fraudulent failure to file
failure to deposit employment taxes
failure to file information returns (e.g., 1099s) or furnish payee statements (e.g., W-2s)
lack of accuracy
fraud
tax evasion
failure to collect and pay over tax
perjury and fraud, and
improper claiming of the earned income credit

Well, if you know us, you know exactly the first thing we will recommend; you guessed it, we always recommend hiring a tax professional to assist with a tax filing that is a bit more complex than, say, a single person with a W2 for a source of income (although, trust me, we have seen even that go awry); and not just any tax preparer, but one with a solid reputation for accuracy and diligent work with an abundance of experience.

Things You Can Do On Your Own:

Come early, come prepared, and do your homework beforehand. Most tax firms are booking out starting late in the year prior to tax season opening. Don't miss the opportunity to get in line early.

Do some tax research on your specific situation; when you come in, you will be much better versed in some areas of your tax picture, which would help the tax professional save you time and money.

Complete your tax accountant's tax organizers as best as you can. Always inquire if you are unsure what the question means or is intended for.

Pay in the smaller of 100%/110% of the prior year's total tax or 90% of the current year's tax through either withholdings or estimated tax payments. You can make estimated tax payments online or via mail with any governing tax agency.

File for an extension even if you are not ready to file your taxes; filing late is one of the heaviest penalized penalties in existence. And if you usually owe with the return, or expect to owe this year, send out the payment with the extension. It will be reconciled when you file the tax return, and any overpayment will be refunded to you.

Review your return before signing. You and the tax professional are signing the returns under penalties of perjury, which is quite a serious matter. Check everything on your return with a number on it. If this is your first year preparing the tax return with a firm, be sure to review your general information as well (names, socials, addresses, and so on). And make sure that absolutely all of your income is reported to the tax authorities. Accuracy-related penalties for missing income are some of the harshest too.

Things You Can Do With Your Tax Professional's Assitance:

Do not discount the power of performing a tax projection/plan with your trusted tax professional if you owe with each year's tax filing.
If your tax documents are lost, you can request a copy of your income wage and earnings tax transcript directly from the IRS or through your tax professional.

If you are unsure how much to send in, and you have some savings to send out for tax payments, send it ahead of time anyway, even if you are not sure that is the correct amount to send; it may be better than sending nothing at all. Do it under the guidance of your tax professional so you are not sending out too much.

Perform an inventory and make a list of the tax documents and work papers you submit for processing; this will make everything go faster when processing and help ensure you get all the essential documents.

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