Video:How to Avoid Tax Penaltieswith D. Craig Godfrey
Taxes can be confusing, and by filing incorrectly, you may incur steep tax penalties. Learn how to avoid tax penalties so that you do not encounter problems with the IRS when filing your taxes.See Transcript
Transcript:How to Avoid Tax PenaltiesHey guys, Greyson Ferguson here with About.com. Today we are gong to look at ways to avoid common tax penalties.
Late Filing is a Common Tax Penalty to AvoidThere are a number of tax payer penalties that the IRS could assess on a tax payer. The most common ones are failure to file a return, other wise known as a late filer penalty, and there is also a failure to pay tax or a late payment penalty.
When you file your return late, either or both of these penalties will be assessed. If you cannot pay your return by April 15th, your individual return, you should ask for an extension and pay all the taxes you project you are going to owe. If you don’t, you have a six-month extension, so your new extended due date is October 15th of that year.
If you pay any amounts after April 15th, you could have a failure to pay penalty which is 0.5 percent per month plus interest. A failure to file penalty is 5 percent per month plus interest.
Serious Tax Penalties Require Tax AttorneysOther penalties are fraudulent to file tax return, bad checks to pay tax return, accuracy related penalties, willful to evade to tax, willful false return. If any of these are assessed, you should get a professional involved.
Smaller Deductions Incur Smaller Tax PenaltiesIf it is a smaller deduction, it can even be $1000 or $2000, most likely the agent will not assess a penalty, just interest. If it is a larger amount and you claim $50,000, and you shouldn't have, you may be hit with an accuracy-related penalty. This means it is a substantial change in your return and the IRS can hit you with a 20 percent penalty.
Well there you have it. I'd like to thank the folks at Godfrey Wise Berg, and to learn more yourself, visit us on the web at About.com.
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