https://accountingsolutionsltd.com/accounting-articles/tax-penalties/ Tax Penalties What Penalties Does the IRS Impose? If you do not file...
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Tax Penalties
What Penalties Does the IRS Impose?If you do not file your return and pay your tax by the due date, you may have to pay a penalty. You may also have to pay a penalty if you substantially understate your tax, understate a reportable transaction, file an erroneous claim for refund or credit, or file a frivolous tax submission. If you provide fraudulent information on your return, you may have to pay a civil fraud penalty. Here are the most common penalties for the most commonly used personal and business tax returns:
Penalties for Late Filing/Late PaymentFailure to file
Late payment: 0.5 percent of unpaid taxes for each month, or part of month after the due tax. If you filed for an automatic extension, no penalties are applied if you paid at least 90 percent of your actual tax liability by the due date and the balance by the extension date.
The IRS also imposes combined penalties for filing and paying late.
Penalties for Late Filing of Business Tax Returns
Partnership Returns.For the 2009 tax year, the late filing penalty for a partnership return is $89 for each partner, for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were partners in the partnership during any part of the partnership’s tax year. No penalty will be imposed if the partnership shows that the late filing was due to reasonable cause. S Corporation Returns If no tax is due, the late filing penalty for returns required to be filed through the 2009 tax year is $89 for each month or part of a month (up to 12 months) the return is late or does not include the required information, multiplied by the total number of persons who were shareholders in the corporation during any part of the corporation’s tax year. The penalty change discussed in the preceding sentence also applies if tax is due. In addition, the minimum additional late filing penalty for returns required to be filed after 2008 that are more than 60 days late increased to $135 or the balance of the tax due on the return, whichever is smaller. For more information, see the Instructions for Form 1120S.
Increased Penalties Beginning with 2010 Tax YearSection 16 of the Worker, Homeownership and Business Assistance Act of 2009, Public Law 111-92, increases the penalty for failure to file partnership and S Corporation returns. The late filing penalty has been increased from $89 per partner or shareholder to $195 per partner or shareholder for each month or part of month that the business tax return is late, up to a maximum of 12 months.
The two most common accuracy related penalties are the “substantial understatement” penalty and the “negligence or disregard of the rules or regulations” penalty. These penalties are calculated as a flat 20 percent of the net understatement of tax.
Fraud and Frivolous Return Penalties
Penalty for Bounced Check
If the check you use to pay the IRS bounces, they can charge you a penalty. The penalty is 2 percent of the amount of the check – unless the check is under $1,250, in which case the penalty is the amount of the check or $25, whichever is less. The U.S. government has been substantially increasing penalties for the past several years. It is safe to say that this trend will probably continue. In increasing penalties, revenues to the government increase while the politicians can say that they didn’t increase taxes. If you are having problems with your Tax Penalties or have issues with your accounting in general, we would love to help. I enjoy hearing from my readers, and can be contacted at Chris@AccountingSolutionsltd.com Additional Accounting Articles and information on my firm can be found at www.AccountingSolutionsLtd.com
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