Filing taxes incorrectly or incompletely is a problem for the Internal Revenue Service (IRS). Failure to pay or file forms can be costly to a taxpayer or their company.
The IRS expects employers and taxpayers to pay taxes owed on time and in the correct way. When there is a failure to file appropriately or pay fully, problems ensue.
Common IRS failure penalties that could cost you
Here are three types of failures that the IRS will pursue:
- Failure to file penalty: Most taxpayers are aware that April 15 is the standing due date for annual taxes. Other types of taxes have different due dates. For any of the tax due dates applicable to you or your company, if taxes are not paid on time and no extension has been sought, there will be a failure to file penalty. One exception to this is the filing of your Report of Foreign Bank and Financial Accounts (FBAR). While your FBAR is also due on April 15, the IRS automatically grants a filing extension without application to October 15. Unless you can show good cause as to why your forms were late, the amount of the failure to file penalty is calculated on the amount of tax you owe. For individual taxpayers, the penalty is currently five percent of taxes due while the form is late, up to a maximum of 25 percent.
- Failure to pay penalty: If you fail to file your tax forms on time, the chances are good that you are not paying the associated tax on time, either. That said, a failure to pay penalty is applied if you do not pay the amount of tax calculated on your return or tax form. The penalty is also applied to sums that you inadvertently did not report on your tax forms.
- Failure to deposit: Employers are responsible for collecting and depositing employment taxes with the IRS. Unless payroll tax payments are paid correctly, accurately, and on time, the IRS may assess a failure-to-deposit penalty. The penalty is based on the unpaid portion of the required deposits.
Last thought—interest is charged on all these penalties. If you owe, make sure you know what it is going to cost you. Speak with an experienced tax attorney for advice and options for handling your tax liability.
Safeguard your business with reputable tax legal advice
Understanding IRS requirements is crucial for maintaining business compliance. The legal team at Robert J. Fedor, Esq., L.L.C., delivers the guidance needed to keep your operations off the radar of the IRS. If you receive a penalty letter, audit letter, or other correspondence from the IRS, contact our tax attorneys today at 440-250-9709. We serve clients across the U.S. and internationally from our offices in Cleveland and Chicago.
If you are looking for a resource to gain a better understanding of employment tax fraud, download our free eBook, Employment Tax Fraud: What Every Business Owner Needs to Know.