J. William Seabrooke CPA P.C.

This can be a relatively complex subject based on the myriad of tax returns that are required to be filed by taxpayers.  The major income tax returns  are the Form 990 (Tax Exempt organizations), Form 1040 (Individuals), Form 1041 (Estates and Trusts), Form 1065 (Partnerships),  Form 1120 (Corporations), and the Form 1120-S (Sub Chapter “S” Corporations).  The best guidance available as to filing instructions and due dates is provided by the IRS website (http://www.irs.gov).  Search for the instructions for your specific tax return and then carefully review the information that is provided in the document.  Most states follow the Federal guidelines since the state returns utilize your Federal return as a starting point for your state tax obligations.  However, this is a general rule and the state department of revenue requirements should also be reviewed.

In my profession we have an adage (that is shared with the IRS) “Ignorance of the law is not a defense!”

If you can not file your tax return by the statutory due date request an extension of the time to file.  There are legitimate reasons for encountering this situation.  However, an extension of the time to file your tax returns is NOT an extension of time to pay your taxes.  The taxes (including your best estimates) have to be remitted to the taxing authority on or before the original due date.  If you can not accurately determine your tax liability there are “safe harbor” rules which if followed will usually allow you to avoid interest and penalties.

Additonal information on this subject is provided below: 

Nine Things You Should Know about Penalties

The tax filing deadline is approaching. If you don’t file your return and pay your tax by the due date you may have to pay a penalty. Here are nine things the IRS wants you to know about the two different penalties you may face if you do not pay or file on time.

1. If you do not file by the deadline, you might face a failure-to-file penalty.
2. If you do not pay by the due date, you could face a failure-to-pay penalty.
3. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.
4. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
5. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
6. You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
7. If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.
8. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.
9. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect. 

Link:  Avoiding Penalties and the Tax Gap 

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