Find out how to avoid or reduce IRS tax audit penalties and keep your hard-earned money!
The Internal Revenue Service (IRS) has sent out a news release to remind people that they have until April 18 to send in their tax returns and make any payments that are still due.
If you don’t, you might have to pay late filing and late payment fees. But the notice also told taxpayers about a few things they can do to avoid or lower tax audit penalties if they can’t pay by the deadline.
If a taxpayer fails to get a tax audit, they may be fined 0.5% of sales, turnover, or gross earnings. (Photo: MGN)
The IRS says filers who can’t pay their taxes in full by the deadline should ask for a six-month filing extension. With this delay, they won’t have to pay late fees or interest and will have until October 16, 2023, to file.
If a person owes money but does not ask for an extension and misses the April 18 deadline, the IRS may charge a “failure to file” penalty.
The IRS usually charges tax audit penalties of 5% of the unpaid tax amount for each month that the payment is late, up to 25% of the outstanding tax amount.
If you don’t file your federal tax return by the deadline and you don’t owe the IRS any money or are due a refund, you won’t have to pay a fine. Even if no money is due to the IRS, there are good reasons to file a tax return.
People who are owed a refund won’t get the money until they file, and if they don’t file within three years of the original deadline, they could lose the money. Also, the IRS has a certain amount of time to inspect a tax return, but that time doesn’t start to run out until the tax return is filed.
The IRS also tells taxpayers that even if they file for an extension, they still have to pay any taxes they owe by April 18. This is true even if they don’t file on time. For any taxes that aren’t paid by the deadline, the IRS charges a failure to pay the penalty of 0.5% of the tax owed per month, up to a maximum of 25% of the tax payable.
Read how to escape IRS tax audit penalties and save a lot of money. (Photo: Shutterstock)
Read these tips to escape IRS tax audit penalties and save a lot of money.
If taxpayers can’t pay the full amount by the deadline, they can ask for a payment plan, such as an installment agreement, to pay off the balance over time. Taxpayers can set up a payment plan using the Online Payment Agreement tool, which is an online resource.
Once a person has set up a payment plan with the IRS, the agency will lower the tax audit penalties for not paying the tax to 0.25 percent of the amount owed.
Lastly, filers can ask the IRS to get rid of a tax audit penalties. Under “reasonable cause” penalty relief rules, the agency might agree to let people who didn’t file their taxes on time or pay the taxes they owe off the hook.
Things like being sick or having a natural disaster could make someone eligible for this relief. There is also a process called “first time penalty abate and administrative waiver,” which could help people get out of paying tax audit penalties even if they missed a deadline for filing or making a payment.
The IRS says that the decision to waive the penalty for the first time is up to them, so they are not forced to do so. However, the agency may give it as a one-time favor if an applicant has a good track record of following the rules and meets all program standards.
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