Aware or Unaware Uncle Sam Comes Calling
Could there be anything more unexpected than one or more IRS agents making a call at your place of business? This was played out at a Sacramento car wash. The amount in question was a four cents payback in 2006. Two IRS agents informed the offender four cents x four years totaled $202.35 including penalties and interest.
Peter Pappas, a tax lawyer, explains how four cents turned into $202.35. The IRS used the offender’s original tax bill to start calculating.
Even after being visited by two IRS agents the offender retained his good nature, paid his dues and offered clients a basic car wash for four cents on 15 April. Anything more went to a Sacramento charity.
Tax penalties keep increasing on any overdue bill no matter how small. Be aware:
- Missing a file deadline may incur a penalty for failure-to-file.
- Non-payment by due date may incur penalty for failure-to-pay.
- Usually failure-to-pay is less than failure-to-file penalty. You must still file a tax return.
- Every month or portion of a month of late return gets 5% of taxes not paid in penalties but not higher than 25%.
- If return is recorded in excess of 60 days following due or extended due date, smallest penalty is least of 100% tax unpaid or $135.
- ½ of 1% taxes unpaid every month or portion of month following due date of taxes unpaid can be penalized up to 25% of taxes unpaid.
- If minimum of 90% of real tax bill by due date is paid and extension recorded no failure-to-pay penalty if balance paid by extended due date.
- If in any month there are failure-to-file and failure-to-pay penalties the failure-to-pay penalty lessens the failure-to-file penalty by 5% but a return filed in excess of 60 days following due or extended due date the smallest penalty is least of 100% of tax unpaid or $135.
- If you can prove failure to file or settle on time wasn’t due to neglect but for a realistic reason, no failure-to-file or failure-to-pay penalty required.
