The goal of IRS penalties is to correct taxpayer behavior. Anyone can face an IRS tax penalty for reasons such as late payment, late tax filing and other tax-related errors and issues. You might receive a notice or letter from the IRS even if your intention was good. But once you are faced with IRS penalties, filing your taxes feels like a mammoth task. If you plan to avoid this nightmare, you should always plan your taxes ahead of time and file your taxes in a correct manner. The best advice is to work with a tax professional or tax accountant so that you can make sure everything is on the right track from the start and IRS tax penalties can be avoided.
If the IRS has penalized you, given below are some of the most effective ways to avoid or reduce the penalties.
When it comes to filing your tax return, you should always do it by the due date. If you think you are going to need extra time, you can request an extension and file your return by the extended due date.
If you fail to file your return in a timely manner, the IRS will penalize you for filing the taxes late. Worse still, you will not get a tax refund if you fail to file the return within a specific period of the original due date. The more you delay your file returns, the more serious penalties you will face. Usually, the IRS charges a tax penalty at 5% of the tax you owe for each month your return is late. Therefore, always try to file your tax returns by the due date or the extended due date.
If you need expert help with tax filing, reach out to one of our tax professionals at the SCL Tax Services in the Bronx, NY.
Even if you file your tax returns in a timely manner, the IRS could still penalize you for failing to pay what you owe by that due date. So, the IRS wants you to file the tax return as well as the taxes due by the due date.
The tax penalty is 0.5% of the taxes due. If you plan to avoid or reduce penalties by the IRS, you should always pay what you own. Paying your taxes in full sends a positive signal to the IRS. Even if you request an extension, ensure you pay your taxes in full to showcase good taxpayer behavior. If the taxes due are more than you are capable of paying, try paying as much as you can by the tax deadline. Then, pay the remaining amount as soon as you can. If you cannot afford to pay the remaining taxes due, go for an installation agreement.
IRS will penalize you if you fail to pay your estimated taxes. The IRS wants taxpayers to adhere to its “Pay as You Go” system, which means you should pay taxes throughout the year.
It is bad taxpayer behavior to pay a big sum of money in taxes at year end. That is not how the IRS wants you to behave. Keep making payments throughout the year as you receive income. If it is found upon calculation that you owe the IRS taxes in excess of $1000, you should expect penalties. To steer clear of or reduce tax penalties, you should adjust your estimated tax payment either from your paycheck or through estimated quarterly payments. For more details in this regard, consult with one of our tax specialists for our Tax Services In & Near Bronx, NY.
Dishonored checks are a common reason for getting penalized by the IRS. So, make sure your check doesn’t bounce.
Before you mail a check to the IRS to pay your taxes, you should recheck your account for fund sufficiency. If you end up mailing the check without having enough in your account, the check will bounce. As a result of a dishonored check, the IRS can choose to penalize you. The IRS charges the dishonored check penalty at 2% of the check amount if it is more than $1,250. You will be charged $25 in penalty, if the check amount is less than $1,250. A good strategy to avoid dishonored checks is to sign up for overdraft protection service with your bank.
If you have received a notice or letter from the IRS, the worst case scenario is to ignore it or not respond to it. This is very bad taxpayer behavior and such an act can put you in serious trouble, not just penalties.
Even if you give up on filing your returns, the IRS has legal grounds to file a tax return on your behalf and conduct the tax assessment. Referred to as “Substitute for Return,”, this scenario arises when you do not respond to an IRS letter stating that you have not filed your tax return and that you should file it as soon as possible. This is a case of tax evasion, which has serious legal ramifications. If you plan to avoid heavy tax penalties and end up in jail, you should never give up on tax filing, indulge in tax evasion or commit tax fraud. Always take IRS letters with all seriousness and respond in a timely manner and go for tax resolution.
Apart from those mentioned above, there are other strategies to reduce tax penalties or avoid them altogether. If you have a tax specialist or an experienced tax professional by your side, it will become easier to steer clear of tax penalties or reduce them when you find yourself faced with one. With Our Tax Services In & Near Bronx, NY, we help individuals and small businesses avoid getting penalized by the IRS by planning taxes ahead of time and filing returns with accuracy. Our experts employ multiple effective strategies to bring you relief in various tax-related matters.
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