Most taxpayers worry about being penalized by the Internal Revenue Service as if tax period weren’t stressful enough. Some conditions are a bit complex while others can be as simple as misplacing a figure. Unfortunately, one little mistake can lead to series of other ones, and before you know it, you have accrued many penalties. These are why we put together few of the most common tax penalties and how you can avoid them.
Tax Day is usually around 15th of April every year; it is a period you fill for your federal tax return and also pay any tax you own. The official date for this year is April 17, 2018. It is advisable that you pay your tax bill on time if you don’t file for an extension (this can extend your due date to the 16th of October 2018) because you might have to pay a fine of 5 percent of the taxes you don’t pay for each month that you file late. The penalty stat accumulating a day after the tax filing due date and if you file your return 60 days late, you will get a minimum penalty of $210 or a hundred percent of the taxes you haven’t paid.
Failing to pay the balance due that shows on the tax return by the due date will get you a penalty of 0.5 percent of the amount of tax you haven’t paid each month, and you can get up to a maximum of 25 percent. It is also possible that they will charge you for interest and other additional fees, so it is paramount you talk to a tax professional for guidance.
How to avoid paying late
Consider filing for an extension earlier if you feel that you wouldn’t be able to complete your taxes before the tax day. You might not face a penalty for late payment if you request an extension to file your return and pay a minimum of 90 percent of what you owe plus your request and you must pay all the remaining balance by the due date of the extended period.
It is better to file your tax return on time even if you wouldn’t be able to pay all the taxes by the due date. It is easier to reduce penalties and additional interest by taking care of your tax payment as soon as you can.
Accuracy penalty can happen because of two common reasons; they are negligence and substantial understatement.
The penalty for false information depends on the situation, and it is between 20 to 40 percent of the total tax underpayment.
How to avoid accuracy penalty
Hiring a tax professional might be a good idea as they can help prepare your tax document in other to avoid inaccuracy. It can also help to prevent negligent since the tax professional will most likely be updated on the rules and regulation of IRS. You can ask a tax lawyer for any tax questions regards accuracy.
Submitting a bounced check to the IRS is not the end of the world, but it is something you must sort right away. In the case that it declined for insufficient funds, it could be processed for the second time, and if it runs for the second time, you won't receive a penalty. You will likely get a penalty if you didn't resubmit a new check. The fee is either $25 if it is less than $1250. And the charge for the one that is over $1250 is two percent of the amount on the check. With the fact that you can get a penalty for a bounced check, you might also acquire a fee for not paying on time.
How to avoid bounced check
Ensure you fund your account to avoid a penalty for a bounced check. It can take few weeks for IRS to process a check so you should make sure to balance your checkbook. Don’t spend the money that is might for paying your tax.
The internal revenue service (IRS) usually provides relief to taxpayers that made an effort to comply with the rules and regulation but were unable to meet the requirement due to circumstances that are beyond their control. Common penalties that are eligible for IRS relief are late payment and filing, and some fees may be permissible. The three types of relief include;