Tax Penalties on Late Filers

If you run into trouble filing your taxes and do not get the forms submitted by April 15 you will be subject to various fines and penalties for filing late taxes. With the current state of the economy, many more Americans are expected to have trouble filing their income tax returns on time, by April 15. Americans have always had trouble filing tax returns, even when the economy was in a good state, but this year might be even worse. If an individual files their taxes with the IRS after the April 15 deadline then there will be an interest rate applied to the remaining balance as well as late fees incurred. There are eight categories for filing late, for making mistakes on the filed documents and for committing fraud on your tax return. Those eight categories include timely filers who do not pay total due, late filers, combined penalties, frivolous tax submissions, mistakes, civil fraud, criminal penalties and interest.

Timely Filers Who Do Not Pay Total Due

The penalty for this group of people is one-half of 1 percent of the tax owed for each month until tax is paid (25 percent maximum). If you are going to file your taxes on time but won’t pay the entire amount due to the IRS then it would be in your best interest to negotiate a payment installment plan with the IRS.

Late Filers

Late filers, those who file past the deadline of April 15, will face a penalty of 5 percent of the tax owed for each month late (up to 25%) and there are increased penalties for fraudulent taxes filed by late filers. If the tax payer’s failure to file their taxes on time is the result of tax fraud, the penalty incurred will be 15 percent for each month up to 75 percent maximum.

Combined Penalties

If an individual falls into both of the previous two categories mentioned above then the failure to file penalty is subtracted by the failure to pay penalty.

Frivolous Tax Submissions

A frivolous tax return is defined as a tax return that does not include enough pertinent information to figure the correct tax or that contains information clearly showing the tax reported was substantially incorrect. For such a filing, an individual can be fined $5,000 by the IRS on top of what that individual already owes the IRS.

Mistakes

Individuals that file an erroneous claim or for refund or credit might face penalties when the taxpayer shows negligence or disregard for the tax filing rules or the taxpayer substantially understates their income tax. The penalty for making such a mistake when filing a return is 20 percent of the understated income.

Civil Fraud

If an individual is suspected of civil fraud, or deliberately underpaying their taxes, the penalties are much higher. Such a penalty would result in 75 percent of the underpayment and is added to your tax.

Criminal Penalties

All of the previously mentioned penalties for late filers fall under the realm of civil penalties. If an individual is charged with a criminal penalty when filing their taxes then they have been suspected of committing tax evasion and other forms of fraud. These individuals face a 75 percent penalty, other fines, and even jail time for committing fraud.

Interest

A late filer who does not pay the entire amount that they owe the IRS when filing will face interest on the remainder of the balance they owe the government.

• Have you incurred tax penalties? If so, contact an experienced Tax Attorney in your area today!