Common Tax Penalties
Even though most people don’t intentionally incur tax penalties, however, many are penalized because they are not aware of the penalties or the impact they can have on their wallet. Before tax season approaches, here are some of the more commonly encountered penalties and how they may be avoided. Keep in mind that there are more severe penalties not mentioned here that apply to fraudulent actions or claims.
Two New Fraud-Prevention Measures from the IRS
The first will purposely delay until February 15 the issuance of refunds for tax returns where there is an earned income tax credit (EITC) and/or a refundable child tax credit (CTC), giving the IRS more time to match the income reported on these returns to the income reported by employers. These two tax credits have been the favorite target of scammers who have been filing fraudulent returns with stolen IDs and fabricated income before the IRS is able to verify the income and withholding claimed on the returns.
Habits That Threaten Your Identity and Pocketbook
We all do things without thinking due to old habits – however, these habits might be creating vulnerable hacks, ID theft, scams and Internet phishing schemes to separate us from our hard-earned money. Take a look at the following:
With 2017 less than a month away, it’s time to focus on getting everything organized in QuickBooks.
Hopefully, you’ve been creating new records, entering transactions, paying employees and submitting payroll taxes, recording payments in addition to running the necessary reports.
It’s no surprise that a big tax trap for businesses is the $600 reporting threshold. Let’s say your business uses the services of an independent contractor early in the year at a cost below the $600 threshold, and you don’t bother to obtain the necessary reporting information from the contractor.
Are you a high-income taxpayer who would like to contribute to a Roth IRA but cannot because of income limitations? Well, here is a work-around that will allow you to fund a Roth IRA.
Fake IRS Mail Notices
Crooks have tried all sorts of e-mails scams, but almost everyone has figured out that the IRS does not send out notices by e-mail. So crooks have changed their tactics. Now, there are reports of taxpayers receiving by mail (or email) fake notices requiring immediate payment to a P.O. Box. The P.O. Boxes are located in cities where the IRS has service centers, but of course are not IRS P.O. Box addresses.
Time Is Running Out!
If you did not file your 2015 return by the normal April due date and requested an extension, be aware that the final due date for your return is October 17, 2016. The date is normally October 15, but that falls on a weekend this year, giving you two extra days to meet your individual tax-filing obligation. There are no additional extensions, so this is it!
Even though you have until October 17, you need to be thinking about getting the return completed in advance of the actual due date. Preparing a return takes time, and last-minute issues may need to be resolved before the return is ready to file. In addition, between 10% and 15% of all tax returns are on extension, creating a rush for this office as many people file at once.
If you are self-employed, October 17 is also the final date when you can fund your existing self-employed retirement plan or establish a new one; without completing your return, there is no way to determine how much you can (or want to) contribute to that retirement plan.
The extended deadline for K-1s from partnerships, S-corporations, or fiduciary returns to be sent out was September 15, so if you have not received that information yet, you should make inquiries.
Extended individual federal returns are subject to a penalty of 5% of the tax due for each month (or part of a month) for which the return is not filed by the October 17 due date, with a maximum penalty of 25% of the tax due. In addition, if you end up owing taxes, the IRS will charge you interest on any tax due, going all the way back to the original April due date. If do not file a required state return and do owe state taxes, the state will also charge a late filing penalty and interest.
If we are waiting for you to supply missing information to complete your return, we will need that information at least a week before the October 17 due date. Please call our office immediately if you anticipate complications related to providing the needed information so that we can determine a course of action for avoiding potential penalties.
Did you know that in addition to winning an Olympic medal, they are also compensated by the U.S. Olympic Committee with prize money: $25,000 for a gold medal, $15,000 for a silver medal and $10,000 for a bronze medal?
Billions of dollars go unclaimed every year from federal and state governments, financial institutions and companies no longer generating activity. Everything from tax refunds, savings or checking accounts, stocks, uncashed dividends or payroll checks, traveler’s checks, trust distributions, unredeemed money orders or gift certificates (in some states), insurance payments or refunds and life insurance policies, annuities, certificates of deposit, customer overpayments, utility security deposits, mineral royalty payments and contents of safe deposit boxes.