- FAILURE TO FILE A RETURN. There is a 5% penalty for unpaid taxes per month (or fraction thereof) for failing to file a tax return. The maximum penalty is 25%, with a minimum penalty of $100 or %100 percent of the required tax shown on the return if the return is not filed with 60 days, including extensions. The $100 minimum penalty is not imposed if there is no underpayment of tax.
- FAILURE TO FILE ON TIME. The penalty is .5% of the unpaid tax per month or fraction of a month, up to 25% of the tax. If at least 90% of the tax is paid by the return’s original due date, the penalty is waived.
- FAILURE TO PAY ESTIMATED TAX. The IRS imposes a penalty which is the IRS rate of interest on the underpayments, which is adjusted quarterly. This penalty is avoided for most individuals if they at least 90% of the liability for the current year, or 100% of the liability for the preceding year. If your Adjusted Gross Income for the prior year is over $150,000 ($75,000 if filing separately), your safe harbor is 110% of the prior year’s liability.
- FAILURE TO DEPOSIT TAXES. Employers must deposit employment taxes on time, or suffer the consequences. If you are not more than 5 days late, the penalty is 2% of the underpayment. From 5 to 15 days late, the penalty is 5%. More than 15 days late is a 10% of the liability. If they have to send you a Notice and Demand for payment, it will cost you 15%. This is a very expensive way to finance your employment taxes. If you do it repeatedly, you will have to show up at the IRS offices and explain yourself.
- FAILURE TO WITHHOLD AND PAY TAXES WITHHELD FROM WAGES. The IRS can collect taxes from the “responsible person” by means of a personal penalty, which is 100% of the emount of employment taxes required to be wittheld from wages. A “responsible party” may be a corporate officer or other employees in position of authority. This penalty cannot be discharged in bankruptcy.
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