Another tax year

Another tax season year has passed, since October 15, 2014, and still a person’s tax return has not been filed (Gulp!). So what are the ramifications for filing late? Generally speaking there are penalties, as well as interest, on any balance due of a tax return. So lets explain what those penalties are.

First, there is a failure-to-pay tax penalty. This tax penalty is triggered if there is a balance due on an individual’s tax return, and it is filed after its regular due date, which is for most individuals April 15th. The penalty is ½ of 1% for each month (or partial month thereof) the tax return is late on the balance due, up to 25%, and even if a person files and extension to October 15th, this penalty counts back to the original due date of April 15th.

Next, there is a failure-to-file tax penalty, which a larger tax penalty. This tax penalty is triggered if a tax return is late, and there is a balance due. Remember, tax returns for most individuals are due on April 15th, and of course allowed to be extended for six months, until October 15th. However, once a tax return is filed after its due date, or its extended due date, the IRS would impose this failure-to-file tax penalty, and the penalty is 5% on the balance due, up to 25%.

Finally, any balance due of a late tax return, from its original April 15th due date, interest on the balance due starts to accrue (from April 16th) and interest is compounded on a daily basis. The interest rate with the IRS changes every quarter, and if there is a refund on a late tax return, the IRS will pay interest as well, at the same rate, as compounded on a daily basis (up to 3 years). So interest with the IRS does operate both ways.

Furthermore, to abate, or to get rid of these tax penalties, a person has to demonstrate reasonable cause, which has been interpreted as what independent and/or usually facts and circumstances beyond a person’s reasonable control that prevented him/her from filing and/or paying his/her taxes on a timely basis (e.g. tragic death on family, major medical aliments, etc.).

So, if you are late in filing your 2013 tax returns and looking for an accounting firm in orange county that can help, you can contact us at info@kayatax.com, and we shall get your late 2013 tax returns (and/or any tax returns on previous years), as quick as possible, so these late tax penalties and interest charges do not continue to mount. We can also see if you have reasonable cause to abate these late tax penalties.