Prevention is better than cure, but if circumstances prevent precaution, then here’s what you
should know. April 15 is the Tax Day deadline for most people. If you’re due a refund, there’s
no penalty if you file a late tax return. But if you owe taxes and you do not file and pay on time,
you’ll usually owe interest and penalties on the taxes you pay late. But there are options
available to mitigate the effect.

Here are eight facts the IRS explains that you should know about these penalties:

1. If you file late and owe federal taxes, two penalties may apply. The first is a failure-to-file
Penalty for late filing. The second is a failure-to-pay penalty for paying late.

2. The failure-to-file penalty is usually much more than the failure-to-pay penalty. In most
cases, it’s much more, so if you can’t pay what you owe by the due date, you should still file
your tax return on time and pay as much as you can. You should try other options to pay,
such as getting a loan or paying by credit card. The IRS will work with you to help you
resolve your tax debt. Most people can set up a payment plan with the IRS using the Online
Payment Agreement tool on IRS.gov.

3. The failure-to-file penalty is normally 5% percent (.05) of the unpaid taxes for each month or
part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the
minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.

5. The failure-to-pay penalty is generally 5% percent (.05) per month of your unpaid taxes. It
applies for each month or part of a month your taxes are still unpaid and start increasing the
day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.

6. If the 5 % failure-to-file penalty and the 5% failure-to-pay penalty both apply in any month,
the maximum penalty amount charged for that month is 5 percent (.05).

7. 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 15 due date, even if you file an extension.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable
cause for not filing or paying on time.

IRS Penalty Abatement Procedures

Taxpayers are often unaware that if they are late filing or paying for their tax return, and it
causes penalties, they may be able to get out of paying them. If you have proven full compliance:

(meaning that you have filed your tax returns and paid any tax that was owed) over the past three
(3) years, you are then able to request a waiver of the penalties.

The waiver is called “First Time Abatement” (FTA), Internal Revenue Manual (IRM
20.1.1.3.6.1 (11-25-2011) tells us this is IRS policy and is used to reward past tax-compliant
taxpayers and to promote future compliance.

The Inspector General for Tax Administration (TIGTA) found that many taxpayers with
compliant (good) tax histories have not been offered, and do not receive, the FTA waiver, from
the IRS. So, if you receive a penalty from the Internal Revenue Service (IRS) and you have been
in full compliance for the past three years, you should send a certified letter to the IRS requesting
abatement of (Failure to File – FTF), (Failure to Deposit – FTD for businesses who pay payroll
taxes or company estimated taxes) or (Failure to Pay – FTP) penalties, whichever applies in your
situation. These abatement requests are approved if you meet the “clean” past 3-year rule.

This report shows that over 1.2 million taxpayers with Failure to Pay Penalties alone did not
receive penalty relief, even though they were qualified for the FTA waiver. So, you must be sure
to send in a letter requesting the abatement, it will not be automatically offered to you.

Remember, the IRS does not automatically try to help you out of trouble with taxes. You must
exercise and demand your rights. Those that sleep on their rights (meaning – those that do
nothing), lose them.

Additionally, you should check with your state Franchise Tax Board or Department of Revenue
to see if they have a similar procedure or policy. Always consult with a tax professional before
you pay any tax or penalties. Tax professionals can save you more than they charge, in money,
time, and peace of mind!

Call today, don’t delay! See how this affects you. We can be reached at 602-264-9331 and on all social media under azmoneyguy.

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