File or Pay Penalties:
number of electronic filing and payment options increases
every year, which helps reduce your burden and also improves
the timeliness and accuracy of tax returns.
When it comes to filing your tax return, however, the law
provides that the IRS can assess a penalty if you fail to
file, fail to pay or both.
Here are eight important points about the two different
penalties you may face if you file or pay late.
1. If you do not
file by the deadline, you might face
a failure-to-file penalty. If you do not pay by the
due date, you could face a failure-to-pay penalty.
failure-to-file penalty is generally more than the
failure-to-pay penalty. So if you cannot pay all the taxes you
owe, you should still file your tax
return on time and pay as much as you can, then
explore other payment options. The IRS will work with you.
3. The penalty for
filing late is usually 5 percent of
the unpaid taxes for each month or part of a month that a
return is late. This penalty 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 is the
smaller of $135 or 100 percent of the unpaid tax.
5. If you do not
pay your taxes by the due date, you will generally have to pay
a failure-to-pay penalty of ˝ of 1
percent of your unpaid taxes for each month or part
of a month after the due date that the taxes are not paid.
This penalty can be as much as 25 percent of your unpaid
6. If you request
an extension of time to file by the tax deadline and you paid
at least 90 percent of your actual tax liability by the
original due date, you will not face
a failure-to-pay penalty if the remaining balance is paid by
the extended due date.
7. If both the
failure-to-file penalty and the failure-to-pay penalty apply
in any month, the 5 percent failure-to-file penalty is reduced
by the failure-to-pay penalty. However, if you file your
return more than 60 days after the
due date or extended due date, the minimum penalty is the
smaller of $135 or 100 percent of the unpaid tax.
8. You will not
have to pay a failure-to-file or failure-to-pay penalty if you
can show that you failed to file or
pay on time because of reasonable cause and not because of
Ways to Pay Your Federal
If you cannot pay the full amount of taxes you owe, don’t
panic. You should still file your return and pay as much as
you can by the April 17 deadline to avoid penalties and
You should also contact the IRS to ask about payment options.
Here are three alternative payment options you may want to
consider and a tip on penalty relief under the IRS Fresh Start
1. Pay by credit or debit card You can use all major
cards (American Express, Discover, MasterCard or Visa) to pay
your federal taxes. For information on paying your taxes
electronically, including by credit or debit card, go to
see the list of service providers below. There is no IRS fee
for credit or debit card payments. If you are paying by credit
card, the service providers charge a convenience fee based on
the amount you are paying. If you are paying by debit card,
the service providers charge a flat fee of $3.89 to $3.95. Do
not add the convenience fee or flat fee to your tax payment.
The processing companies are:
WorldPay US, Inc.:
To pay by credit or debit card: 888-9PAY-TAX (888-972-9829),
Official Payments Corporation:
To pay by credit or debit card: 888-UPAY-TAX (888-872-9829),
To pay by credit or debit card: 888-PAY-1040 (888-729-1040),
2. Additional time to pay. Based on your
circumstances, you may be granted a short additional time to
pay your tax in full. A brief additional amount of time to pay
can be requested through the Online Payment Agreement
application at www.IRS.gov or
by calling 800-829-1040. Taxpayers who request and are granted
an additional 60 to 120 days to pay the tax in full generally
will pay less in penalties and interest than if the debt were
repaid through an installment agreement over a greater period
of time. There is no fee for this short extension of time to
3. Penalty relief. To assist those most in need,
a six-month grace period on the late-payment penalty is
available to certain wage earners and self-employed
individuals. An approved request for a six-month extension of
time to pay will result in relief from the late-payment
penalty for tax year 2011 if:
your income is within certain limits and other conditions are
your request is received by April 17, 2012; and
your 2011 tax, interest and any other penalties are paid in
full by Oct. 15, 2012.
To find out if you are eligible and to apply for the extension
and penalty relief, complete and mail Form 1127-A, Application
for Extension of Time for Payment of Income Tax for 2011 Due
to Undue Hardship.
4. Installment agreement. You can apply for an
IRS installment agreement using the Online Payment Agreement (OPA)
application on IRS.gov. This web-based application allows
taxpayers who owe $50,000 or less in combined tax, penalties
and interest to self-qualify, apply for, and receive immediate
notification of approval. You can also request an installment
agreement before your current tax liabilities are actually
assessed by using OPA. The OPA option provides you with a
simple and convenient way to establish an installment
agreement, eliminates the need for personal interaction with
IRS and reduces paper processing.
You may also complete and submit a Form 9465, or Form 9465-FS,
Installment Agreement Request, make your request in writing,
or call 800-829-1040. For balances of more than $50,000, you
are required to complete a financial statement to determine
the monthly payment amount for an installment plan. You may be
able to avoid the filing of a notice of federal tax lien by
setting up a direct debit installment payment plan. For more
complete information see Tax Topic 202, Tax Payment Options
and the Fresh Start page on
For more information about filing and paying your taxes, visit
www.IRS.gov and choose 1040
Central or refer to the Form 1040 Instructions or IRS
Publication 17, Your Federal Income Tax. You can download
forms and publications at
www.irs.gov or request a free copy by calling 800-TAX-FORM
( taken from IRS Tax Tip 2012-68
Click Here To Learn Why When Your Bring Your 2011-2012
Taxes To Us And You’re Entered Into a Drawing For a
50-Inch Large Screen TV!
5 Tips for Taxpayers
Who Can't Pay Their Taxes on Time
If you owe tax with your federal tax return, but can't afford
to pay it all when you file, the IRS wants you to know your
options and help you keep interest and penalties to a minimum.
Here are five tips:
1. File your return on time and pay as much as you can with
the return. These steps will eliminate the late filing
penalty, reduce the late payment penalty and cut down on
interest charges. For electronic and credit card options for
paying see IRS.gov. You may also mail a check payable to the
United States Treasury
2. Consider obtaining a loan or paying by credit card.
The interest rate and fees charged by a bank or credit card
company may be lower than interest and penalties imposed by
the Internal Revenue Code.
3. Request an installment payment agreement. You do not
need to wait for IRS to send you a bill before requesting a
payment agreement. Options for requesting an agreement
include: • Using the Online Payment Agreement application and
• Completing and submitting IRS Form 9465-FS, Installment
Agreement Request, with your return IRS charges a user fee to
set up your payment agreement. See www.irs.gov or the
installment agreement request form for fee amounts.
4. Request an extension of time to pay. For tax year
2011, qualifying individuals may request an extension of time
to pay and have the late payment penalty waived as part of the
IRS Fresh Start Initiative. To see if you qualify visit
1127-A, Application for Extension of Time for Payment. But
hurry, your application must be filed by April 17, 2012.
5. If you receive a bill from the IRS, please contact us
immediately to discuss these and other payment options.
Ignoring the bill will only compound your problem and could
lead to IRS collection action. If you can’t pay in full and on
time, the key to minimizing your penalty and interest charges
is to pay as much as possible by the tax deadline and the
balance as soon as you can. For more information on the IRS
collection process go to or see IRSVideos.gov/OweTaxes.). (
taken from IRS Tax Tip 2012-64
click here to listen to this video update on:
click here to listen to this video update on:
read an article in SmartMoney magazine recently that
I wanted to pass along to you titled:
5 Little-Known Tax Deductions by Bill Bischoff
where he talks about it being possible to write off
some expenses that were paid for by someone else
1. Medicare Insurance and Long-Term Care
2. Medical Expenses Paid by Someone Else
3. Real Estate Taxes Paid by Someone Else
4. Home Mortgage Points Paid by Someone Else
5. Fees to Charge Taxes to Your Credit Card
Click here to read the article online.
Records You Can
Throw Away This
Spring is a lovely time to toss out that growing mountain of
financial papers & tax documents that clutters your home &
office. Here's what you need to keep & what you can pitch
without fearing the fury of the IRS.
Let's begin with your "safe zone," the IRS statute of
limitations. This limits the number of years in the work of
which the IRS can audit your tax returns. One time that period
has expired, the IRS is legally prohibited from asking you
questions about those returns.
The idea behind it is that after a period of years, records
are lost or misplaced & memory is not as correct as they would
hope. There is a necessity for finality. After the statute of
limitations has expired, the IRS cannot go after you for
additional taxes and you cannot go after the IRS for
The Three-Year Rule
For assessment of additional taxes, the statute of limitation
runs usually 3 years from the date you file your return. If
you are looking for an additional refund, the limitations
period is usually the later of 3 years from the date you filed
the original return or 2 years from the date you paid the tax.
There's some exceptions:
If you have claimed a loss from a valueless security, the
limitation period is extended to seven years.
In case you don't document all of your income & the unreported
amount is over 25% of the gross income actually shown on your
return, the limitation period is six years.
In case you file a "fraudulent" return, or don't file at all,
the limitations period doesn't apply. In fact, the IRS can get
you at any time.
If you are deciding what records you need or require to keep,
you need to ask what your chances are of an audit. A tax audit
is an IRS verification of items of income & deductions on your
return. So you ought to keep records to support those items
until the statute of limitations runs out.
Assuming that you have got filed on time & paid what you ought
to, you only must keep your tax records for years, but some
records must be kept longer than that.
Keep in mind, the three-year rule relates to the information
on your tax return. But, a number of that information may
relate to transactions over years elderly.
Here's a checklist of the documents you ought to hold on to:
Capital gains & losses. Your gain is reduced by your
basis - your cost (including all commissions) and, with mutual
funds, any reinvested dividends & capital gains. But you may
have bought that stock 5 years ago & you have been reinvesting
those dividends & capital gains over the last decade. Plus
don't forget those stock splits.
You do not ever need to throw these records away until after
you sell the securities. Plus then if you are audited, you'll
must show those numbers. Therefore, you'll need to keep those
records for at least 3years after you file the return
reporting their sales.
Expenses on your home. Cost records for your house &
any improvements ought to be kept until the home is sold. It
is nice practice, although most owners won't face any tax
issues. That is because profit of less than $250,000 on your
home ($500,000 on a joint return) is not subject to taxes
under tax legislation enacted in 1997.
If the profit is over $250,000/$500,000, or in case you don't
qualify for the full gain exclusion, then you are going to
need those records for another years after that return is
filed. Most owners probably won't face that issue thanks to
the 1997 tax law, but of coursework, it is better to be safe
Business records. Business records can become a
nightmare. Non-residential actual estate is now depreciated
over 39 years. You could be audited on the depreciation up to
3 years after you file the return for the 39th year. That is a
long time to hold on to receipts, but you may need to validate
Employment, bank, & brokerage statements. Keep all of
your W-2s, 1099s, brokerage, & bank statements to show income
until 3 years after you file. Plus don't even think about
dumping checks, receipts, mileage logs, tax diaries, & other
documentation that substantiate your expenses.
Tax returns. Keep copies of your tax returns also. You
cannot depend on the IRS to actually have a replica of your
past returns. As a general rule, you ought to keep tax records
for 6 years. The bottom line is you have got to keep these
records until they can no longer affect your tax return, plus
the 3-year statute of limitations.
Social Security records. You will need to keep some
records for Social Security purposes, so check with the Social
Security Administration each year to confirm that your
payments have been appropriately credited. If they are wrong,
you'll need your W-2 or copies of your Schedule C (if
self-employed) to show the right amount. Do not dispose of
those records until after you have validated those
Contact us by phone or e-mail in case you have any questions
about what records you need to keep this spring.
To read this & my other articles online go to
and click on the Newsletter section.
always you can call me at 714-619-0667 if you have any
questions about investing, retirement or any other tax &
accounting related issues.
Regards, Monica Rebella, CPA/IAR
President, Rebella Accountancy