Paying taxes is something that most Connecticut residents know they have to do but would rather not do. Even so, you and those individuals do what you can to comply with the law.
Unfortunately, mistakes happen. The IRS may understand this, but this does not mean it won’t take some form of action against you. If you make one of the following mistakes, you could end up facing penalties.
If you fail to pay taxes reflected on your return
You may file your tax return, but you may not be able to pay the balance it says you owe. If that happens, you could face the following IRS penalties:
- If you filed your return on time and entered into an installment agreement with the IRS, the penalty is 0.25% of the amount owed.
- If you file your return on time but fail to pay the taxes reflected on your return, the penalty is 0.50% of the balance owed.
- If you fail to pay within 10 days before the IRS acts on a notice of intent to levy, the penalty is 1% of the amount owed.
You could also face a recurring charge for as long as any of the reported amount remains unpaid.
If you fail to pay taxes not reflected on your return
Perhaps the IRS says it discovered that you forgot to include income on your tax return that resulted in taxes owed. The agency will send you a notice of demand for payment with some time restraints. If you fail to pay such taxes that are under $100,000 within 21 days or 10 days if it exceeds that amount, you could face the following penalties:
- If you fail to pay within 10 days before the IRS acts on a notice of intent to levy, the penalty is 1% of the amount the IRS claims you owed.
- If you entered into an installment agreement with the IRS, the penalty is 0.25% of that.
- If you fail to pay by the date indicated in the notice, which varies depending on the amount, the penalty is 0.50% of the balance the agency says you owe.
Recurring charges could apply under these circumstances as well.
If you fail to file your tax return
Not everyone has to file a tax return each year, but if filing would have resulted in you owing money, the IRS expects you to file a return. Not doing so does not relieve you of the need to file, and you could face the following penalties:
- The IRS could charge you for up to five months for each month you don’t file your return. Even if you do file before a full month passes, the IRS could still charge you a penalty for the full month.
- The penalty could be 5% of the amount your return would show you owe, but the IRS could reduce the charge if you would owe two penalties in the same month.
- The IRS could assess a specific dollar amount, depending on the tax year for which you did not file.
You could end up owing a significant amount in penalties for not filing your return. If you cannot file by the April deadline, you would be wise to at least request an extension. It may not keep you from owing penalties, but it could prevent owing any more in penalties than absolutely necessary.
Other times the IRS assesses penalties
Finally, the IRS may assess penalties if you fail to pay estimated taxes or if your bank does not honor the check you wrote to the agency.
If the IRS accuses you of any of the above actions, you could face significant financial losses due to the associated penalties. Before simply taking the word of the IRS, you could consult with a Connecticut tax attorney to see what you may be able to do about the situation.