IRS Issues Reminder: Taxpayers Can Face Penalties for Both Failure to File and Failure to PayNews, Offshore Account Update
Posted in on March 18, 2022
On March 17, 2022, the Internal Revenue Service (IRS) published a Tax Tip reminding taxpayers that they can face penalties for both failure to file and failure to pay. So, what if you aren’t ready to file (or pay) on April 18? Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.
Taxpayers Can Request a Filing Extension (But Must Still Pay What They Owe)
Individual and corporate taxpayers that aren’t ready to file their annual returns on April 18, 2022, can request a filing extension. By filing IRS Form 4868, taxpayers can extend their filing deadline to October 17, 2022.
However, as the IRS notes in its Tax Tip, “an extension of time to file is not an extension of time to pay.” Even if a taxpayer isn’t ready to file on Tax Day, the taxpayer must still pay all tax due in order to avoid interest and failure-to-pay penalties. Failure-to-pay penalties are calculated as 0.5 percent of the tax due for each month (or part of a month) the tax remains unpaid, subject to a maximum penalty of 25 percent of the total amount due. If a taxpayer incurs both a failure-to-file penalty and a failure-to-pay penalty, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty applied.
Dealing with the IRS When You Can’t Pay What You Owe on Tax Day
Many individual and corporate taxpayers find themselves in the position of being unable to pay what they owe on Tax Day. If you find yourself in this position, what options do you have available?
The answer to this question depends on several factors, including (but are not limited to):
- Why you are unable to pay,
- Whether you would be able to make payments over time, and
- Whether you are already behind on what you owe the IRS.
Generally speaking, taxpayers should pay as much as they can for the current tax year. However, as making a partial payment can also trigger IRS scrutiny, taxpayers must be careful to ensure that they have a long-term plan in place. This applies across the board, but it is especially important for taxpayers that have outstanding tax debt from prior years. The options for addressing new and existing tax debts are different; and, if a partial payment triggers an IRS audit, it will be important to show that you have proactively taken steps to address your past payment deficiencies.
Ultimately, taxpayers need to make informed decisions with their long-term best interests in mind. If you have concerns about what to do before (or after) Tax Day, we encourage you to contact us for more information.
Request a Confidential Consultation with Virginia Tax Lawyer Kevin E. Thorn
If you have questions or concerns about what you owe the IRS in 2022, Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, can help. Please call 703-752-3752, email email@example.com or contact us online to request a confidential consultation.Share This Post