How To Avoid IRS Tax Penalties
By Victor Ochieng
If IRS sends you a filing notice and you still miss the April 18 deadline and the tax extension, which also falls on the same day, you’re putting yourself on an unwanted ground as you may end up spending more than you expected.
Luckily, there are some steps you can take to avoid the hefty penalties.
Below are some the steps as outlined by Jennifer Calonia on The Network Journal;
Establish whether you have a due tax refund
You’re likely to miss out on your tax refund if you fail to file your 2015 tax return. IRS policy stipulates that you must file for a tax refund within a three-year period after its due date for you to claim it. There are big tax prep entities that will help you if you would like to determine whether you’re entitled to a tax return. You’ll only need to provide them with some basic information such as your 2015 filing status and marital status as well as a few answers to some specific questions.
Pull together all the documents and tax forms you need to file a return
Whether you’re filing yourself or involving a tax prep company, you’ll need to provide specific documents, including receipts and statements to help establish whether you’re entitled to tax credits and deductions. Documents such as Social Security number, statements of savings and other tax related documents should be availed.
Submit 2015 tax return ASAP
After gathering all the important information and documents you need to file tax return, commence the 2015 tax filing process. The reason why it’s important to file your tax return ASAP is because failure to do so would attract 5% interest on the taxes you owe for every month you fail to file after the deadline (capped at 25% of the total amount owed). It’s free to submit your tax return, and you can easily do it through IRS website. There are also some third party services such as Turbo Tax or H&R Block that you can work with. Electronically filing the returns makes it faster, affordable, and removes the possibility of lost or delayed returns as experienced when filed through U.S. mail. Admittedly, filing through U.S. Postal Service might save you when trying to cut down on late-filing penalties.
Pay all taxes you owe
Have you finally submitted your tax return for 2015 to the IRS? If yes, act fast and pay the taxes you owe. Ensure that all the amounts you owe in terms of late-payment and late-filing penalties are paid as well. If you chose the traditional approach, you can send your payment via mail in the form of a check or money order.
Ensure you keep all records and confirmations
After filing and paying all amounts owed, ensure all electronic trails and confirmations of all tax payments are kept safe in case something happens and you need proof that you’d actually played your part.
IRS recommends that you keep all documents for a period of three years after filing your tax returns and making payments. However, there are cases where you’ll be asked to keep some documents indefinitely.