Posts Tagged ‘tax tips’

Failure to File or Pay Tax Penalties: Eight Facts

Friday, May 25th, 2012

The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns. When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.

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

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.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.

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.

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.

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.

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.

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.

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.

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Tax Tips for Job Hunters and Career Changers

Sunday, March 11th, 2012

Seven Tax Tips for Job Seekers – Edited by G. Mentz, JD, MBA, CWM®

If you have been out of work or looking for a job, here are some tips from the IRS that you may find useful. These tips may also help you get more money back or even bigger deductions for looking for work.

Many taxpayers spend time during the recent months updating their résumé and attending career fairs.

Here are seven things the IRS wants you to know about deducting costs related to your job search:

1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation. This same rule tends to apply to education that you seek that will allow you to engage in a new occupation.

2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income, up to the amount of your tax benefit in the earlier year.

3. You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.

4. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.

5. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.

6. You cannot deduct job search expenses if you are looking for a job for the first time.

7. The amount of job search expenses that you can claim on your tax return is limited. You can claim the amount that is more than 2 percent of your adjusted gross income. You figure your deduction on Schedule A.

For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available on www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

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