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Things You Should Know about Filing Late and Paying Penalties

April 18 was the deadline for people to file their federal tax return and pay any owed taxes. For those who are due a refund, there is no penalty for filing a late tax return. However, for those who owe taxes a late filing will most likely result in additional interest and penalties on the tax you pay late. To keep interest and penalties to a minimum, these individuals should file their return and pay the tax as soon as possible in order to avoid or reduce the effects of the following:

  1. Two penalties may apply. One for filing late and the other for paying late. As interest accrues on top of penalties, the additional costs can add up fast.
  2. Penalty for late filing. If a 2015 tax return is filed more than 60 days after the due date, or extended due date, the minimum penalty is $205, a rate of five percent of your unpaid taxes to a maximum of 25 percent, per month. Any amount less than $205 that is owed in taxes equates to a penalty of 100 percent of the unpaid tax.
  3. Penalty for late payment. The penalty is generally one-half percent of your unpaid taxes per month and can build up to as much as 25 percent of your unpaid taxes.
  4. Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is five percent per month.
  5. File, even if you can't pay. Filing on time and paying as much as you can will keep your interest and penalties to a minimum. If you can't pay in full, taking out a loan or paying by credit card may ultimately be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill, the less you will owe in penalties.
  6. Payment Options. Explore your payment options on the IRS website. For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan using the IRS' Online Payment Agreement Application.
  7. Late payment penalty may not apply. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 18 due date.

To learn more about Sanders Thaler Viola & Katz, LLP,
visit www.st-cpas.com.

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