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EDUCATION CENTER
GTT RESOURCES: EXTENSIONS: CAN'T PAY
See our Updated Trader
Tax Center pages.
See our Extension blog
article dated March 29, 2012
OLDER CONTENT:
Much of the below has been revised, see our new extension blog above.
There is new special hardship relief on Form 1127-A
Penalties and problems caused by paying your taxes
late
We strongly advise you to pay 100-percent of your tax liabilities by April
15 of the following year. This will ensure no penalties and interest.
Topic 653 - IRS Notices and Bills, Penalties and Interest Charges
http://www.irs.gov/taxtopics/tc653.html
April 15th is the deadline for most people to file their individual income
tax return and pay any tax owed. Tax returns are checked for mathematical
accuracy. If there is any money owed, you will be sent a bill. Generally,
interest is charged on any unpaid tax from the due date of the return
until the date of payment. The interest rate is determined every three
months and is the federal short–term rate plus 3 percent. Interest
is compounded daily. If you file on time but don't pay all amounts due
on time, you'll generally have to pay a late payment penalty of one–half
of one percent of the tax owed for each month, or part of a month, that
the tax remains unpaid from the due date, until the tax is paid in full
or the 25% maximum penalty is applied. The one–half of one percent
rate increases to one percent if the tax remains unpaid 10 days after
the IRS issues a notice of intent to levy. For individuals who file by
the return due date, the one-half of one percent rate decreases to one-quarter
percent for any month in which an installment agreement is in effect.
If you owe tax and don't file on time, the total late–filing penalty
is usually four and one-half percent of the tax owed for each month, or
part of a month, that your return is late up to five months. If your return
is over 60 days late, the minimum penalty for late filing is the smaller
of $100 or 100 percent of the tax owed.
You must file your return and pay your tax by the due date to avoid interest
and penalty charges. Often the funds necessary to pay your tax can be
borrowed at a lower effective rate than the combined IRS interest and
penalty rate.
To ensure your payment on a bill for tax is credited properly, be sure
to return the tear–off stub on your bill and use our return envelope.
Please make your check or money order payable to the United States Treasury.
Enter the primary social security number or employer identification number,
the tax year and form number and your telephone number on your check or
money order.
The penalties for filing and paying late may be abated if you have reasonable
cause. If you're billed for either penalty and feel you have reasonable
cause, send your explanation along with the bill to your service center,
or call the IRS at 1–800–829–1040 for assistance. Generally,
interest charges may not be abated; they continue to accrue until all
assessed tax, penalties, and interest are paid in full. Generally, any
reasonable cause exception to the penalty for failure to pay tax cannot
be determined until the tax is first paid in full.
If you believe there is an error on your notice or bill, write to the
IRS office that sent it to you within the time frame given. You should
provide photocopies of any records that may help correct the error. Also,
you may call the number listed on your notice or bill for assistance.
If you are correct, we will make the necessary adjustment to your account
and send you a corrected notice.
For more information about IRS notices and bills, refer to Publication
594 (PDF), Understanding the Collection Process. More information about
penalty and interest charges is contained in Chapter 1, Filing Information,
of Publication 17, Your Federal Income Tax.
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