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We prepare most type of tax returns:

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S Corporation.

C Corporation.

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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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Client Testimonials

I used Gary’s services to file my 2012 income tax return. This was my first year having an accountant do my return, as I have always done it myself using TurboTax. However, this year I had cancelled debt from my old primary residence which I was forced to convert to a rental property after relocating out of state.

While it didn’t cost me anything to do the short sale, the income tax consequence from the cancelled debt, roughly $50,000 in my case, was enough to move me from the 15% tax bracket to the 25% tax bracket.  Needless to say, I was concerned about that.

Finances were already tight and my husband and I are expecting our first child this fall. So the possibility of owing income tax was stressing me out. However, Gary was great at relieving my fears.

He is extremely knowledgeable, answered all my questions and was very thorough. I knew I was in good hands. He kept in constant contact with me throughout the process, keeping me updated on the progress of my return and letting me know what paperwork he needed to complete my filing.

In my mind, best case scenario would have been to not owe any taxes. Second best would be to only owe a little. Well, you can imagine my surprise and delight when Gary told me I was actually due a refund of a little over $2,700.00!

To top it all off, I found Gary’s fee for service to be fair, competitive and affordable; especially given the complexity of this type of return. I am so glad I did not try and go it alone this year. I am extremely pleased with Gary’s service and would recommend him highly to anyone, in fact I already have. If you have cancelled debt from a short sale or foreclosure, don’t freak out. Take a deep breath and call or email Gary. I am grateful I did.

Angie Falke of Holiday, FL

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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Tax Penalty CPA explains IRS failure-to-file and failure-to-pay penalties | Business and Personal

tax penalty CPA discusses failure to file and failure to pay

Gary Bode, CPA: the IRS can abate both these penalties if you can show just cause. For a free phone consult call (910) 399-2705.

CPAs see a range of IRS penalties. But in this post, we’ll cover the failure-to-file and failure-to-pay issues. At the end, I’ll cut and paste an IRS blurb on the topic as well.

Failure to File Penalty: assessed if you don’t file on time, or, file beyond the date of an extension.

Failure to File penalties are based on the amount of tax due. 5% per month of the unpaid tax, up to a cap of 25% . So, it maxes out at five months. Remember, there’s interest too.

What if you file late and have a refund due? After two months late, there’s a minimum penalty of $135 assessed.

What if you can’t pay? The Failure to File penalty makes it prudent to file your tax return on time and pay what you can. The IRS is good about working with you on paying the balance. But to avoid penalties, you have to pay at least 90%.

“A common misconception exists that you don’t have to file a tax return if you’re getting money back. But it seems silly to forego a refund. The IRS will still demand a correct return at some point and assess a penalty, albeit small.” 
-Gary Bode, tax penalty CPA

But with S Corporations, where there is no tax due, filing late without an extension incurs a $195 penalty per shareholder.

Failure to Pay Penalty

0.5% of the unpaid tax per month up to a maximum of 25%. So, it maxes out at 50 months.

The IRS isn’t Heartless

You can request abatement for both penalties for just cause. If IRS parameters are published, I’ll provide them in a future post. But examples may include a death in the immediate family at tax time, or a fire destroying your records. CPAs would present proof, like the Fire Department’s report for example, with any abatement request.

I’m a tax CPA with a virtual office to accommodate long distance clients. Personal, business, LLC, Corporate, non-profit, Partnership, and international forms like Form 2555 and Form 5471. For a free phone consult, call (910) 399-2705.

Here’s the IRS blurb, cut and pasted.

Here are eight important points about the two different penalties you may face if you file or pay late.

1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.

2. 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 on time and pay as much as you can, then explore other payment options. The IRS will work with you.

3. 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.

4. 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.

5. If you do not pay your taxes by the due date, you will generally 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.

6. If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.

7. 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 percent of the unpaid tax.

8. 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.

 

2 comments to Tax Penalty CPA explains IRS failure-to-file and failure-to-pay penalties | Business and Personal

  • MP

    I submitted my information to a CPA who told me he had filed my LLC reqeust for extension. Instead it turns out he only filed a personal extension and now I have a bill from the IRS for over $1000.

    When the returns were filed, no tax was due.

    He appealed to the IRS but they rejected it. Is it unreasonable to expect them to pay the penalty since they assured me everything had been filed?

    • When I hear about CPA problems it generally boils down to poor communications. Sorry for your problems. I don’t recall ever having the IRS not abating these fines when I’ve requested it – for client and occassionally our errors. If I was in the wrong, we’d pay the fine. But sometimes clients assume things and the CPOA doesn’t cover all the bases with an engagement letter. Maybe you could try a letter to the IRS? They might not back down for the CPA but they might for you.

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