Failure to file tax penalty: how to avoid
- By Manny Davis
- Published 04/17/2010
- Finances
- Unrated
Failure to file tax penalty: how to avoid
Tax penalties are very common. Every year, millions of Americans are faced with owing the IRS additional money in penalties. Avoiding the failure to file tax penalty is extremely important as this is one of the most hefty tax penalties you can receive and it is one of the easiest penalties to avoid. The last thing you want to do is give more money to the IRS for a simple mistake or something that could have been easily avoided. The only thing you should be worrying about is how you are going to pay your taxes, not how are you going to be able to pay your penalties
Here are a few tips that can help you prevent the failure to file tax penalty:
1. File your taxes on time. As you can imagine, this is the best way to avoid this penalty. If you send your final return by April 15th you never have to worry about this. Does it get any easier than that? If you know you will not be able to meet this deadline, you should immediately contact the IRS to file for an extension. Filing for an extension doesn't mean you get an extension on paying your taxes as well. If you file an extension and don't pay your taxes you will be hit with the failure to pay penalty. The failure to pay penalty is .5% a month on the total tax amount owed, which is significantly less than the 5% a month if you didn't file your taxes. Remember, the IRS is willing to work with you if you keep them in the loop. The last thing you want to do is wait around and hope that the IRS does not realize that you filed late – you are not going to be so lucky.
2. Remove penalties. Have you been hit with a failure to file tax penalty? Do you feel that this is unfair? If so, you may be able to have them removed through penalty abatement – although this is not guaranteed. You need to prove to the IRS that you had a reasonable cause for not filing on time. By successfully doing so you should be able to have your failure to file tax penalty wiped out. Believe it or not, the IRS removes approximately 30 percent of the penalties that they charge each year. So, as you can see, the IRS is willing to listen to you. But if you don’t have reasonable cause, your failure to file tax penalty will probably stay in place.
To avoid the failure to file tax penalty you should file your return on time or request an extension. Just understanding how the basic failure to file and failure to pay penalties work can save you a lot of money in penalties. You have to realize that the IRS looks at not filing your taxes as 10 times more severe than not paying your taxes, which is why the penalty is 10 times greater. So even if you can't pay your taxes, be sure to file to avoid a lot of penalties. If you are hit with the failure to file penalty and have a good reason for not filing on time, be sure to take advantage of penalty abatement to remove the penalties. No matter what, make sure you do what you can to avoid the failure to file tax penalty.
Here are a few tips that can help you prevent the failure to file tax penalty:
1. File your taxes on time. As you can imagine, this is the best way to avoid this penalty. If you send your final return by April 15th you never have to worry about this. Does it get any easier than that? If you know you will not be able to meet this deadline, you should immediately contact the IRS to file for an extension. Filing for an extension doesn't mean you get an extension on paying your taxes as well. If you file an extension and don't pay your taxes you will be hit with the failure to pay penalty. The failure to pay penalty is .5% a month on the total tax amount owed, which is significantly less than the 5% a month if you didn't file your taxes. Remember, the IRS is willing to work with you if you keep them in the loop. The last thing you want to do is wait around and hope that the IRS does not realize that you filed late – you are not going to be so lucky.
2. Remove penalties. Have you been hit with a failure to file tax penalty? Do you feel that this is unfair? If so, you may be able to have them removed through penalty abatement – although this is not guaranteed. You need to prove to the IRS that you had a reasonable cause for not filing on time. By successfully doing so you should be able to have your failure to file tax penalty wiped out. Believe it or not, the IRS removes approximately 30 percent of the penalties that they charge each year. So, as you can see, the IRS is willing to listen to you. But if you don’t have reasonable cause, your failure to file tax penalty will probably stay in place.
To avoid the failure to file tax penalty you should file your return on time or request an extension. Just understanding how the basic failure to file and failure to pay penalties work can save you a lot of money in penalties. You have to realize that the IRS looks at not filing your taxes as 10 times more severe than not paying your taxes, which is why the penalty is 10 times greater. So even if you can't pay your taxes, be sure to file to avoid a lot of penalties. If you are hit with the failure to file penalty and have a good reason for not filing on time, be sure to take advantage of penalty abatement to remove the penalties. No matter what, make sure you do what you can to avoid the failure to file tax penalty.
Manny Davis
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