Filing a past due return may not be as
difficult as you think.
Taxpayers should file all tax returns
that are due, regardless of whether full payment can be made with the return.
Depending on an individual’s circumstances, a taxpayer filing late may qualify
for a payment plan. It is important, however, to know that full payment of
taxes upfront saves you money.
SK
Tax Associates, we provide range of extended services to our clients in various
industries. We provide traditional accounting and tax related services
to individual and businesses from bookkeeping, payroll processing, sales tax
compliance and annual tax returns but our focus is always to go beyond
compliance and help our client thrive by providing extended range of services
that are rarely offered by most CPA firms.
Here’s What to Do When Your Return Is
Late
Monday, April 18, 2016, was the tax
deadline for most taxpayers to file their 2015 tax return. If you didn’t file a
tax return or an extension to file but should have, take action now.
First, gather any and all information
related to income and deductions for the tax years for which a return is
required to be filed, then call the office.
If you’re owed money, then the sooner
you file, the sooner you’ll get your refund. If you owe taxes, you should file
and pay as soon as you can, which will stop the interest and penalties that you
will owe.
If you owe money but can’t pay the IRS
in full, you should pay as much as you can when you file your tax return to
minimize penalties and interest.
Payment Options – Ways to Make a
Payment
There are several different ways to
make a payment on your taxes. Payments can be made by credit card, electronic
funds transfer, check, money order, cashier’s check, or cash. If you pay your
federal taxes using a major credit card or debit card, there is no IRS fee for
credit or debit card payments, but the processing companies charge a convenience
fee or flat fee.
Payment Options – For Those Who Can’t
Pay in Full
Taxpayers unable to pay all taxes due
on a tax bill are encouraged to pay as much as possible. By paying as much as
possible now, the amount of interest and penalties owed will be less than if
you do not pay anything at all. Based on individual circumstances, a taxpayer
could qualify for an extension of time to pay, an installment agreement, a
temporary delay, or an offer in compromise. Please call if you have questions
about any of these options.
When it comes to paying your tax bill,
it is important to review all your options; the interest rate on a loan or
credit card may be lower than the combination of penalties and interest imposed
by the Internal Revenue Code. You should pay as much as possible before
entering into an installment agreement.
For individuals, IRS Direct Pay is a
fast and free way to pay directly from your checking or savings account.
Taxpayers who need more time to pay can set up either a short-term payment
extension or a monthly payment plan. Most people can set up a payment plan
using the Online Payment Agreement tool on IRS.gov.
- A short-term extension gives a taxpayer an additional 60 to 120 days to pay. No fee is charged, but the late-payment penalty plus interest will apply. Generally, taxpayers will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.
- A monthly payment plan or installment agreement gives a taxpayer more time to pay. However, penalties and interest will continue to be charged on the unpaid portion of the debt throughout the duration of the installment agreement/payment plan.
Taxpayers who owe $25,000 or less in
combined tax, penalties and interest can apply for and receive immediate
notification of approval through an IRS web-based application. Balances over
$25,000 require taxpayers to complete a financial statement to determine the monthly
payment amount for an installment plan.
A user fee will also be charged if the
installment agreement is approved. The fee, normally $120, is reduced to $52 if
taxpayers agree to make their monthly payments electronically through
electronic funds withdrawal. The fee is $43 for eligible
low-and-moderate-income taxpayers.
- Starting in 2016, individual taxpayers who do not have a bank account or credit card and need to pay their tax bill using cash, are now able to make a payment at one or more than 7,000 7-Eleven stores nationwide. Individuals wishing to take advantage of this payment option should visit the IRS.gov payments page, select the cash option in the other ways you can pay section and follow the instructions.
Penalties for Filing a Late Tax Return
If you are due a refund there is no
penalty if you file a late tax return. If you owe tax, and you failed to file
and pay on time, you will most likely owe interest and penalties on the tax you
pay late. Here are some facts that you should know about penalties for filing a
late return:
Two penalties may apply. One penalty is for
filing late and one is for paying late. They can add up fast. Interest accrues
on top of the penalties.
Penalty for late filing. If you file your
2015 tax return more than 60 days after the due date or extended due date, the
minimum penalty is $205 or, if you owe less than $205, 100 percent of the
unpaid tax. Otherwise, the penalty can be as much as five percent of your
unpaid taxes each month up to a maximum of 25 percent.
Penalty for late payment. The penalty is
generally 0.5 percent of your unpaid taxes per month. It can build up to as
much as 25 percent of your unpaid taxes.
Combined penalty per month. If both the late
filing and late payment penalties apply, the maximum amount charged for the two
penalties is 5 percent per month.
Late payment penalty may not apply. If you requested an
extension of time to file your income tax return by the tax due date and paid
at least 90 percent of the taxes you owe, you may not face a failure-to-pay
penalty. However, you must pay the remaining balance by the extended due date.
You will owe interest on any taxes you pay after the April 18 due date.
File even if you can’t pay. Filing on time and
paying as much as you can keeps your interest and penalties to a minimum. If
you can’t pay in full, getting a loan or paying by debit or credit card may be
less expensive than owing the IRS. If you do owe the IRS, the sooner you pay
your bill the less you will owe.
What Happens If You Don’t File a Past
Due Return or Contact the IRS?
It’s important to understand the
ramifications of not filing a past due return and the steps that the IRS will
take. Taxpayers who continue to not file a required return and fail to respond
to IRS requests for a return may be considered for a variety of enforcement
actions.
Don’t Wait!
If you haven’t filed a tax return yet,
call the office today to schedule an appointment as soon as possible.
http://schaumburgcpa.info/cpa-in-chicago.html
is an official blog of Manen Kothari CPA. To ensure compliance with the
requirements imposed by the IRS, we inform you that any U.S. federal tax advice
contained in this communication (including any attachments) is not intended or
written to be used, and cannot be used, for the purpose of (i) avoiding
penalties under the Internal Revenue Code or (ii) promoting, marketing, or
recommending to another party any transaction or matter addressed herein. One
should consult their tax advisor before any of the information contained
herewith applied to their individual tax situations.
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