Minimize What You Owe by Taking These Tips to Heart

While many people are focused on their loved ones during Valentine’s Day this month, there’s one thing you shouldn’t forget to do: review your taxes. Finances can take a toll on your relationships if you don’t keep track of how much you’re paying in taxes. In previous editions, we’ve broken down how to determine how much you’re overpaying or underpaying in taxes. If you find yourself underpaying and unable to make up the difference, you’ll most likely be faced with IRS penalties.

If you fail to pay or file your taxes on time, you’ll receive either a “failure to pay” or a “failure to file” penalty. Even if you pay a portion of your taxes by April 15, a penalty might still be applied. While you may still get the fine, it’s always important to pay as much as you can on time. This way, you’re reducing additional interest and penalties.

The late penalty for filing is generally 5% of every month’s unpaid taxes. The penalty starts accruing on April 16 but will not exceed 25% of what you owe. However, there are exceptions. For S corporations, failure to file penalties amount to $195 per shareholder per month.

If you do not pay your taxes by the deadline, you are immediately given a “failure to pay” penalty of 0.5% of your total unpaid taxes. This accrues every month you do not pay your taxes. The silver lining is if both penalties are applied, your total penalty won’t exceed 5%.

If you find yourself without the resources to pay your taxes in full or in part, you do have options. Your tax professional can work with you to set up an affordable IRS instalment agreement. An instalment agreement is a monthly payment plan where taxpayers in need can pay down a tax debt in more manageable amounts over time. This prevents the IRS from levying any assets or bank accounts as long as payments are made on time.

You can also file for an extension before the tax deadline. If you do this, and you’ve paid at least 90% of what you owe, you may not face a late penalty at all. If you file your taxes more than 60 days past April 15 or your extended due date, the minimum penalty is either 100% of your unpaid taxes, or $135, whichever is smaller. Although, if you can prove reasonable cause for not paying on time, you may avoid late fees altogether. After you’ve made the necessary adjustments in your taxes, identify the root cause of your tax liability to ensure it doesn’t happen again next year.

If you’re still concerned about the penalties you may face this tax season, contact us for immediate assistance. We can help resolve an anticipated IRS collections case way before the IRS enforcement begins. As licensed back tax specialists, we can also try to remove any penalties from your tax account as well.

At Landmark Tax Group, we can help you navigate through the entire process so you’re spending more time focusing on your loved ones and not tax penalties.

Contact us for a FREE no-obligation consultation at (949) 260-4770 or help@landmarktaxgroup.com.

~ Michael Raanan MBA, EA, Former IRS Agent

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