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How bad are the penalties?
Sometimes Uncle Sam gets you again if you failed to report all of your earnings or incorrectly filled out your tax return. Here are some of the more common reasons on why tax payers are forced to pay penalties.
Underpayment
April 15 is looked upon as the day where we must pay our taxes. In fact, it is actually the day we need to finish paying our taxes for the past year. The IRS will actually charge you a fee if you have yet to pay at least 90% of what you owe in taxes for the current year or 100% of what you paid in taxes for the previous year. You are able to get away with paying the lesser of the two. For instance, if you owed $10,000 in taxes last year and owe $40,000 in taxes this year, you are free of penalties if you paid at least $10,000 by December 31.
Late Payments
In addition to the underpayment charges, there are three other common ways where the IRS will hit you with if you don't give them enough money by the appropriate date, then you may be charged:
If you file your taxes on time, but not pay the full amount you owe, you may be charged the following:
- Interest on any unpaid tax from the due date of the tax return through the date of payment
- A late payment penalty.
If you file your taxes late and owe money, you may be charged the following:
- Interest on any unpaid tax from the due date of the return through the date of payment
- A late payment penalty.
If you file for an extension but don't pay the tax you owe by April 15, you will avoid the late filing penalty; you may be charged the following:
- Interest on the unpaid tax from April 15 through the payment date
- A late payment penalty.
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