Every year people filing tax returns are shocked to learn they owe more than they can pay. You must face your tax problems quickly to avoid any penalties and interest charges that could increase your debt.
What to Do When You Cannot Afford to Pay Your Taxes!
If you owe money and are unable to pay it, you face extreme tax penalties and compounding interest rates on the outstanding balance. What may begin as a small amount, can rapidly escalate into a gargantuan debt. The best way to do something about this debt is to call an experienced tax firm like us, to battle the IRS for you, and negotiate a favorable debt settlement and penalty abatement.
Instant Tax Solutions is very adept at working through the IRS bureaucracy. We are familiar with the various tax codes and know how to maneuver through the system. Do not let the fact that you owe money to them eat up your life. Consultation with one of our knowledgeable staff members will leave you with a sense of hope.
How Instant Tax Solutions Can Help
More often than not, a taxpayer will not file a tax return because they are afraid they owe money. With the help of ITS, you may be surprised to find that you do not owe money after all. We can help you process your tax returns and find out if you are eligible for a refund. If you are due a refund, then you do not owe any fees for late filing. This is why it is to your advantage to have us help you.
However, on the other hand; if you do end up owing money, we can still help you. We can help you file forms if you have reasonable cause for not being able to pay your taxes. We will carefully and completely review all of your financial information to see if you qualify for any waiving of fees and additional charges. If you do, then we will file the appropriate paperwork, check it for accuracy, locate missing information and act as your personal liaison with the IRS. If you are subjected to tax penalties, we can still help you.
There are three separate IRS penalties you should be aware of:
- Failure to Pay
- Failure to File
You Do Not Have to Face the IRS Alone
Instant Tax solutions professionals are very well versed with the tax code and how it applies to taxpayers. We will explain each tax penalty in detail and how it applies to you. We will walk you through the process of filing any late returns or filing for an extension if needed. We can show you how you can avoid other potential penalties and get your tax problems back on track again. Let us do the complex tasks for you and take away any ambivalence you may be experiencing.
What is this Penalty or Interest Charge I am getting?
The IRS has outlined all of their penalties and charges in the Internal Revenue Code. These are supposed to encourage “voluntary compliance” from taxpayers. They have over one-hundred and forty different federal tax penalties that can be assessed for a wide variety of issues including; tax fraud, accuracy related penalties, late filing penalties, late payment penalties, failing to pay a tax, and filing a frivolous return.
As mentioned previously, a fraudulent return penalty is related to someone failing to report income or underpaying their income tax. These actions constitute fraud in every state and if caught, the fine is quite severe. The underpayment penalty is 75% of the under paid tax amount and the penalty also has a 75% maximum rate. This is a very serious and costly charge and if you have questions, ask your tax specialist because they know the laws and codes.
The accuracy-related penalty is related to personal or income information being incorrect. This impedes the efforts of the IRS to process the return and this conduct will be severely penalized and enforced. If you omit a social security number or use a fake number, you are committing a serious error and it will cause the IRS to come after you with great fervor. You will end up owing for not filing a truthful statement on your income tax return.
The importance of dotting your I’s and crossing your T’s
As you can see it is very important to file an accurate tax return in a timely manner. You can incur an IRS penalty for any number or reasons, if you find this to be the case then consult with a tax specialist to find out what your options are. There are many inclusions in the tax codes that may limit your liability in certain circumstances. You may be able to prove a case for an exception to your fines and penalties, in which case you may be able to have your penalties lessened or even erased totally. Your tax professional will review your tax returns and determine if any of these conditions are optional for your case.
Information for self-employed individuals
If you believe you are going to owe more taxes the following year then you have two options. If you are self-employed or expect your investment earnings to be minor, then provide your tax specialist with a new W-4. If you allow for extra with-holdings then you may withhold more taxes from your paycheck. If this is not a viable option for you then you can also begin making “estimated tax payments”. This is done by having you tax specialist file a form called a 1040-ES. You can begin making quarterly estimated tax payments and hopefully this will offset IRS underpayment penalties that might be encountered. Either way if you owe money, your tax specialist can go over what options will work best for you.
What You Need to Know About these Charges
Every year working people know the drill about filing an income tax return. Whether you owe money or are due a refund, you are still responsible for filing a tax return and complying with the tax codes and laws. Some people file their own tax returns while some people will retain the assistance of a tax professional to file their yearly income tax returns for them. If you find that you are in a position to owe additional money, then if you don’t already have tax professional then you definitely need to get one.
Tax penalties: What you do not know can cost you!
An initial penalty can seem like a very intimidating situation, but you can find out if you are eligible for hardship considerations. This can mean the difference between owing possibly thousands of dollars and maybe being able to have the tax penalty forgiven or reduced. If you are not sure where to begin, then talk to your tax professional and explain the situation. Once they know what is going on, they can apprise you of your options and responsibilities.
If you owe back taxes to the government, they will assist you in assessing your penalty and figure in the interest on the amount as well. However, it is very simple if you do not owe any money then there is no fine. There are three types of penalties: failure-to-file, failure-to-pay and interest. The differences between the fines are something that your tax professional can explain to you in detail. IRS penalties are calculated quite differently so if you are unsure then don’t worry your tax professional will also know about the process and take care of it for you.
How penalties are assessed
If you find yourself in a position of owing an IRS late tax penalty, then it is best to take care of it as quickly as possible. Your tax professional will help you and will gather all the information you need. If you are the subject of a failure-to-file penalty, this fine is calculated from the deadline date of the tax return. It is 5% per month that the tax return is late and this IRS late filing penalty has a maximum of 25% of the balance due to the IRS.
A failure-to-pay penalty is calculated upon the amount of money you owe if you have underpaid the IRS. The minimum amount of .05% is assessed for each month you owe the taxes, and will keep being added on until you pay off the fines. This amount may not appear to be much, but the longer it goes on and when factored into any other amounts you owe, you can have a large debt built up before you know it.
Interesting facts about interest rates
As for any interest you may owe, this is based on how much tax money you owe. Interest rates change quarterly and will accrue quite rapidly. Once you are given an IRS tax penalty, you can expect the amount you owe is going to fluctuate because of the interest involved. The rate of interest is added to your tax fine daily and the rate is currently at 5%, which is a yearly rate. There are lessons to be learned when dealing with the IRS interest and penalties. If you find you may need additional time in filing a tax return then, have your specialist file an extension for you. No matter what happens; if you have a tax professional on your side you are more likely to have a better outcome. They will deal with all the information and work with the IRS on your behalf and are adept at all kinds of tax situations.
Paying the Charges
If you do not pay your taxes, you will more than likely face stricter charges with interest and other fees attached. However, these circumstances do not have to ruin your life. You can get help and information regarding paying back late IRS tax penalties and interest. If you knowingly submit a false tax return or you do not pay the full amount owed, this can be constituted as tax fraud. You can be sanctioned with fraud charges or even criminal charges.
Failure-to-file penalty information
A failure-to-file penalty is accessed when taxpayers do not file their income tax return by the due date. The penalty rate is 5% of the amount of the tax unpaid accessed each month. The rate cannot be more than 25% of the unpaid tax balance, but the amount due can be reduced if you experience both a failure-to file penalty along with a failure-to-pay penalty. If your return is more than sixty days past due, the IRS tax penalty will be not less than one hundred dollars or 100% of the unpaid tax balance. However, if you are experiencing financial difficulties in paying back your IRS tax penalties and interest, an IRS tax professional may be able to get the amount reduced or eliminated by showing justifiable cause for failing to file the taxes on time.
Differences between failure-to-file and failure-to-pay penalties
There is a big difference between the failure-to-file penalty and the failure-to-pay penalty. Thefailure-to-pay penalty is a penalty of ½ to 1% of your unpaid income tax liability. The interest accrues on a monthly basis and will continue to accrue if you do not do something about it. The failure-to-pay penalty cannot be more than 25% of the unpaid tax debt. Again, a tax professional can have this amount reduced or eliminated if they can prove you had a justifiable reason for not paying the late fees and interest.
There is an additional penalty for a frivolous return. This happens if you submit a tax return that does not contain enough information to process. This penalty is $500 and is added to any other applicable charges.
An accuracy-related penalty is another penalty that can be filed against you. This is assessed to taxpayers who do not adhere to the tax laws or do not report income information accurately. The tax penalty rate is 20% and cannot exceed 20% of the unpaid income tax owed. If you have any questions about these or other fees the government has tacked on, please give our experts a call to answer any questions you may still have.
Income Tax: Keeping Up to Date on Your Earnings
If you work then you have a legal responsibility to pay income taxes on a yearly basis. It is advisable for you to file and pay your taxes when they come due. If you are unable to do this then you will likely be assessed an income tax related penalty. You will receive a statement or notice from the IRS informing you of what they have charged, and why they did. If you have questions concerning your notice, please give us a call to learn more.
Understanding Income Tax Penalties
The penalty will not only include the current amount owed, it will also include interest applied to the amount as well. If you can’t pay by the due date then expect an income tax penalty to be filed against you. Even if you or your tax attorney has filed for an extension, you will still be penalized with interest charges on your balance. The amount of interest is determined by the amount you owe, the federal short term rate and an additional charge of 3 percent.
Fines, Penalties, and Interest
There will also be additional charges for late, negligent or failure to file tax returns. These are also subjected to an income tax charge with interest. The interest rate will accrue from the date of your return and will compound rather quickly. When you are late in filing your tax return and in making any payments, you will be charged an interest rate of 0.5% on a monthly basis. The amount maximum is 25% of the balance owed and is applicable to all money that is owed.
Your tax attorney will explain that you are also liable for an income tax fee if you file a late return. Again, the rate is 5% of the outstanding balance and is charged on a monthly basis. Unless you can prove that you have exigent circumstances and are not able to pay the amount you owe. In that case, you can possibly have your tax debt forgiven or reduced. If you give the information to your tax attorney, they can present this evidence to the IRS and negotiate the matter for you personally.
Did you overpay or underpay?
There is also an underpayment charge for underpaying your income taxes. The income tax charge for this type of situation is called a failure-to-pay penalty. It applies from the date that the balance was underpaid and like the other fines it accrues and builds on a monthly basis. Each IRS payment is subject to different charges, so you may still be responsible for an earlier payment as well. Even if you believe you paid the amount. Or even if you have a refund coming, you may still incur a fee. Your tax attorney will assist you and figure out any amount that is due and what you are responsible for.
What is a Trust Fund Recovery?
Have you received notices from the IRS stating that you have not turned in your 941 payroll tax return? Or maybe they have not received them? Are you repaying an outstanding charge or not able to make payments on your payroll taxes? Did you forget to file a return? Are you having financial difficulties? Are you being threatened with a garnishment or levy against your bank account? Or are you possibly facing a Trust Fund Recovery Penalty because of begin personally responsible for the debt? If the answer to any of these questions is yes, then you most definitely need our assistance.
Understanding the Trust Fund Recovery Penalty
As with any problem you encounter, no amount of sidestepping or creative avoidance is going to alleviate the situation. Avoiding it altogether is not an option and will only result in the situation growing more and more out of control. The IRS is very adept at debt collection and they will get their money due, one way or another. That one way could be through a Trust Fund Recovery Penalty. They look for who holds responsibility for the tax debt and then begin the collection process immediately. They issue fines that grow daily with interest fees.
Internal Revenue Code 6672
As part of the debt collection process the IRS will put levies against any and all assets you have personally, as well as any possible business assets. This type of charge is outlined in the Internal Revenue Codes Section 6672 (a). It is outlined as being a 100% penalty, and is assessed in the event that “trust funds” are not paid. Trust funds are considered as income withholding that an employer is required by law to deduct from employee payroll checks. These funds include; federal and state taxes, Social Security and Medicare taxes as well. The amount is held in trust until it is to be paid to the federal government.
Who is liable for paying the penalty?
Who is responsible for paying this type of cahrge? This would be the person who has the power to make the payroll deductions, but who fails to make the required payment. This may be one person or a group of people as a collective. This person may be the company CEO (Chief Executive Officer), a corporate employee, a corporation director or primary shareholder, a board of trustee member of a nonprofit group or any other person who has the authority over the disbursement of payroll funds.
The IRS can levy this against anyone. However, they will determine according to their guidelines that are most financially responsible and go after them. They have outlined rules governing who they determine who is responsible: this person must have had knowledge about the unpaid taxes, have misused the funds to keep the business afloat or disbursed the funds to other creditors, and there are other standards in addition to these. A tax attorney is going to know everything about how to handle this situation and will provide you with proper guidance in the event you are fined.
What can you do to prove your innocence?
If you are on the receiving end of one of these, there are many questions you will have. Such as do you know what your rights are? Are you the one who is legally responsible for the penalty or should it be someone else? Do you know if the IRS has assessed the correct amount of “Trust Funds”? Do you qualify for an Offer of Compromise? Can you make the payment in full or do you need an installment plan? Will they seize your home, property or other assets? All these questions can be answered by a qualified tax professional that will look out for your best interests. We at Instant Tax Solutions can do just that for you!