The IRS wants you to pay the full amount of your tax liability on time. In fact, the IRS imposes significant penalties and interest on late payments if you don’t. Ideally, it is in your best interest to estimate what you may owe and then build that into your family or business budget. Okay, so you didn’t do that. Continue reading
If you ever filed and paid your taxes late, you may have first-hand experience with tax penalties. Sometimes this results in a little bit of interest being charged but other times it can lead to substantial dollar amounts. The IRS and Mass DOR each have their own tax penalties. Here are a few amounts:
Failure to Pay a Tax When Due
You may be subject to a maximum penalty of 25% of the tax due. Mass DOR and the IRS both can assess a version of this penalty. This sounds like a lot, but they typically do not go from zero to sixty on this one. Still, 25% is a hefty amount.
Failure to File a Partnership Return
Massachusetts can charge $5 for every day the partnership fails to file. Partnerships typically do not pay tax since the income passes through to the owners. This is so they cannot charge a percentage of tax owed. Nevertheless, $5 per day can add up quickly. This pales in comparison to the IRS penalty of $195 per partner, per month. This can get out of control very quickly. The good news is that the IRS penalty is capped at 12 months. Eventually however, after several years and depending on the number of partners, the Massachusetts $5/day penalty might catch up to the IRS penalty.
Failure to Satisfy a Required Minimum Distribution
The IRS is great for tax deferred growth but eventually the money has to come out. Taxpayers are required to begin taking distributions by April 1st in the year following the year in which they turn 70-½. If you forget – bam, 50% penalty on the required distribution. Take that, grandma. Outrage and Indignation to follow.
Failure to Report a Foreign Account
Among other tax penalties is failing to report a foreign financial account can get you in hot water with the IRS. Previously, one would file Form TDF 90-22.1 with the Department of Treasury. This was updated recently to FinCEN Form 114 and gets filed electronically with the Financial Crimes Enforcement Network (FinCEN). They threshold for filing is $10,000 at any point during the year. The penalty for non-willful violations is $10,000. The penalty for willful cases is the greater of 50% of the account balance or $100,000 with the possibility of criminal prosecution. Ouch is an understatement to say the least.
Are you looking to avoid tax penalties?
As mentioned, tax penalties can cost you a lot of money. And we believe, better money in your pocket than someone else’s pocket. The best way to avoid tax penalties is to have a trusted professional. Are you are at a place in your business you need tax advice? Do you have thoughts, questions or concerns regarding how to claim the start-up costs for your small business? Please feel free to contact us, leave your comments below or post on our Facebook, Google+ or LinkedIn pages.
Tax Season is Here!
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