Taxes and Penalties and Interest … Oh My!

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Category: Individual Taxes

Written by Wendy Levenfeld

Hits: 2126

If you think the tax forms themselves are complicated, wait ‘til you see the notices you’ll receive from the IRS if your payments are late! Here are the “lions and tigers and bears” the IRS has just waiting for the attack signal!

The Lion: Interest

• You can incur interest expenses for late filing or simply making a mathematical error on your tax return.
• nterest is charged on any unpaid taxes from the due date until the tax is paid. The interest rates for unpaid taxes are posted every three months equaling the Federal “short-term” interest rate plus 3%.  The kicker of this king of the jungle punishment is the interest is compounded daily.

The Tiger: Penalties

• If you file late, penalties will be assessed that are in addition to both the tax due and the interest charged for late payment.
• If you file on time but don’t pay the full amount due, a penalty of 0.5% (½ of one percent) of the total tax owed for each month until you pay in full will be assessed. The bite from this beast is there is no maximum limit to the “failure to pay” penalty.

The Bear: No Excuses/No Refund

• The IRS doesn’t accept ANY excuse for late payment.
• What will “claw” at your sense of fairness is if you are due a refund and file late, you risk losing the refund in its entirety.

Word to the wise; avoid the forest filled with IRS beasts altogether … file you returns on time and pay what you owe!

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