General FAQs On Late Payment & Late Tax Filing Penalties
Penalties related to late tax payments and late filings can increase exponentially if proper care is not taken. With several misconceptions in mind, employers and employees tend to make mistakes and face severe consequences.
Here are some of the common queries that individuals frequently have in their mind and which must be cleared in order to stay clear of any penalties.
“If I don’t file for a federal tax return for the year 2015 by the deadline, can I claim refund that I’m expecting?”
Generally, people under such scenario will not be subjected to penalties, but they are required to file a return in order to claim refund. To file a tax return for 2015 and claim the refund, a deadline of 3 years is provided starting from April 18, 2016, after which the refund cannot be claimed and the money is transferred to the government.
“I have filed for a federal tax return on time but I owe some unpaid taxes.”
In this case, a failure-to-pay penalty needs to be paid which is 0.5% of the balance due for each month for which the tax is not paid. The penalty can rise to a maximum of 25% of the unpaid taxes. Also if the payment is unaffordable then an installment agreement can be set up with the IRS.
“If I don’t file for a federal tax return or the extension on time and owe some unpaid taxes too. What will be the penalty?”
This kind of situation will put the individuals under two types of penalties; one for failure in filing a tax return or the extension within deadlines and other for not paying the taxes on time. The penalty for non-filing of taxes is 5% of the balance due for each month for which the tax is not paid; whereas the penalty for non-payment of taxes is 0.5% of the balance due for each month for which tax is not paid. Maximum for both these penalties is 25% of the unpaid taxes. Moreover, if the filing for tax returns is delayed for more than 2 months (60 days), then the minimum failure-to-pay penalty will be 100% of unpaid tax or $135( whichever is smaller).
“I filed for an IRS accepted extension on time. I expect a tax refund or have nothing to pay in taxes.”
Generally, in such a case you will have until October 15, 2016 in order to file a tax return for 2015. Although you won’t have to pay any penalties but the tax filing must be done within 3 years of the original deadline so that you can claim a refund.
“I filed for an IRS accepted extension on time. I owe some unpaid taxes and have not paid them yet.”
If 90% of the due balance (for which the extension was granted) is paid then late payment penalties won’t apply. Otherwise you need to pay 0.5% of the balance due for every month for which the taxes remain unpaid. Maximum penalty in such case will be 25% of the unpaid taxes.
“I filed for an extension but it got rejected and I did not file it again. Moreover I owe unpaid taxes.”
This is similar as failure in filing a tax return, thus any individual falling under such category has to face penalties for non-filing and non-payment. In general, non-filing of taxes is considered as more expensive than non-payment of the taxes.
“If there is a reasonable cause for not filing tax return or paying the taxes owed on time, will I still have to pay the penalties?”
If a reasonable cause is presented before IRS, then you may get exempted from facing the penalties for non-filing and non-payment of the taxes.
By having a proper understanding of these common queries, employees can easily avoid the penalties and the devastating consequences. Go on and analyze which category you fall under or what deadlines you need to keep in mind while filing returns or paying taxes.
To make the process easier, TeemWurk, along with the aid of domain experts helps you keep aware of the upcoming tax deadlines and penalties associated with them. With such a technology and expertise by your side, you are sure to comply with all the rules and regulations without making any errors.
