I did not file my taxes by the deadline of April 15th but did file an extension.
Why do I owe my taxes due and additional fees?
Federal taxes are typically due on April 15th and they must be filed by that deadline to avoid penalties and fees. If you do not file your taxes by the deadline, the IRS will send a letter regarding the penalty for not filing in time. The Failure to File Tax penalty is calculated based on the amount of tax that remains unpaid and how late the tax return is filed.
Failure to File Penalty
If you have not filed by the deadline the penalty is 5% of the tax amount due for each month or partial month that the tax return is late. The penalty amount will not exceed 25% of the tax amount due. To avoid the Failure to File penalty, an extension can be filed for your tax return prior to the deadline. This extension provides additional time to file but does not provide an extension of time to pay the taxes due. Interest is charged for penalties as well.
If you owe taxes and have not paid the amount due in full by the deadline, the IRS may impose a Failure to Pay penalty. If Failure to File and Failure to Pay penalties are due for the same month, the filing penalty is reduced by the amount charged for the Failure to Pay penalty for that month for a combined penalty amount of 5% for each month or partial month that the return was late. If the return was late for more than 60 days, there is a Failure to File fee schedule followed.
Reducing Penalties
To avoid all penalties and interest, be sure to file and pay the tax due by the deadline. If no tax is due, file an extension to allow for an additional 6 months to file. This will avoid any Failure to File penalties and interest. In the event that you do receive Failure to File or Failure to Pay penalties, some of the penalty may be able to be removed or reduced. Interest cannot be removed or reduced unless the penalty amount is removed or reduced.
The IRS will consider each case independently and evaluate the situation for “reasonable cause”. There are valid reasons for not paying or filing on time such as natural disasters, fires, or serious illnesses, for example. Contact the IRS directly to discuss penalty relief if you feel a valid reason applies. Be sure to have the letter sent by the IRS with the penalties and interest indicated with you when you call and the amount of penalty you are requesting to have removed as well as the reasons why this is being requested. Have the facts listed and any supporting documentation available such as hospital records or documentation of natural disasters, if those circumstances apply. If the penalties are reduced or removed, the associated interest should automatically be reduced or removed as well.
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