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IRS Tax Penalties –
Better to File & Owe Than Not
File & Owe
(Based on William Perez,
About.com, Wikipedia article and IRS.GOV 4/6/09)
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If you have a refund, there
is no penalty for filing late, so you
don’t need to file an extension
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If you owe tax, file sooner rather than later
because penalties are based on amount of tax owed and lateness.
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If you owe taxes, there are
two separate penalties and interest on the tax amount due for filing late.
Failure to File Penalty is from the deadline of your tax return (including
extensions - April 15 or October 15) to the date you file your tax return.
The penalty is 5% per month, up to a maximum of
25%. After five months, the penalty is 25%.
If you file the return more
than 60 days after due date, the minimum penalty is $135 or 100% of the amount
owed, whichever is less. If you file an extension and pay at least 90 percent
of tax liability by the due date, there is no failure-to-pay penalty.
Failure to Pay Penalty is on tax you owe. The penalty is 0.5% for each month
the tax is not paid in full. There is no
maximum limit to the failure-to-pay penalty. It begins April 15 until the
balance is paid in full.
Interest is on tax you owe from April 15. Interest rates
change every three months. Currently (April 2009) it is 4% per year.
The interest is calculated on a daily basis.
What does all this mean?
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If you owe, file sooner rather than later.
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If you may be a few months late on your tax
return, file an extension to reduce or avoid the Failure to File Penalty.
Information provided here is
a summary and not complete; for complete details refer to irs.gov
(compiled by John Lee VITA San Pablo 4/09/09
summarized by Shahid Mujtaba, VITA @ Milpitas Public Library 4/10/2009)
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