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I Haven’t Filed My Tax Return for 2012 Yet, Am I Going to Get an IRS Penalty?

Michael S. Anderson Aug. 16, 2013

If you haven't filed a 2012 return yet and you didn't ask for an extension to file, you need to file it as soon as possible. The IRS gets to add interest and penalty to your debt for each month un-filed and for each month unpaid and it adds up fast.

The penalty for filing a late tax return is about 5% of the amount of unpaid tax you owe for each month or part of the month that the return is late. The amount is capped at 25% of the amount owed. For example, if the debt is $15,000, the first penalty for the month is about $750.00.

There is also the failure to pay penalty that equals one-half of one percent of the amount of unpaid tax. This penalty is capped as well at 25% of the tax due.

Many of my clients are shocked when they file several years of late tax returns and find that for many of the years, the debt is almost double the net tax. Interest is accruing on the net tax and interest is accruing on the penalties which will total 50% of the net tax at some point.

Filing an extension to file doesn't solve the requirement to pay the tax. The extension only allows more time to file the return, not to pay it, and if you file it after the extension date, the late filing penalty kicks in anyway. There is no extension to pay the tax.

Many people we meet haven't filed for several years. The first step we take is to determine which years to file and to get those years filed. Once we know the amount including the penalty and interest, we are able to determine the best legal option and than we can negotiate with the IRS or take some other legal avenue. Depending on the situation, we may be able to arrange a reasonable payment plan, get penalties eliminated, negotiate a formal settlement via the IRS Offer in Compromise or even use bankruptcy to deal with the debt at some point.

The most common option we see is when we are able to challenge the incorrect Substitute Return the IRS has created with a correct return and substantially reduce the debt. Just this week we finalized some returns that will change the tax debt for a client from about $150,000.00 to about $50,000.00, a savings of $100,000.00

We are here to help with your tax problems whether you are late in filing, late in paying, the IRS is sending threatening letters or you are being audited. We help our clients make and implement plans that result in freedom from IRS problems.