The
Internal Revenue Code provides for penalties
for failures to file returns or pay taxes in
an attempt to make certain that all taxpayers
and taxpaying entities pay their share of taxes.
The penalties imposed by the IRS typically consist
of payment penalties; however, the IRS can impose
criminal penalties for willful failure to file
taxes, tax evasion, or making a false statement
on your taxes. The penalties are an acknowledgment
that taxpayers and taxpaying entities would
not pay their taxes or file tax returns if they
weren't required to do so.
The following failures will result in a penalty:
- Failure
to File Tax Return. A penalty will be
imposed for not filing your tax return.
The penalty is based on the amount of tax
not paid by the due date;
- Failure
to Pay Tax. A penalty will be imposed
for failure to pay your taxes by the due
date. You will have to pay a penalty for
the period of time that your taxes aren't
paid, which penalty cannot be more than
25 percent of your unpaid tax;
- Failure
to Withhold, Deposit, or Pay Taxes.
A penalty will be imposed if you don't withhold
income, Social Security, or Medicare taxes
from your employees, or if you withhold
taxes and don't deposit them or pay them
to the IRS. You may be subject to a penalty
on the unpaid tax, plus interest. And you
may be subject to penalties if you deposit
the taxes late;
- Failure
to File Information Returns. A penalty
will be imposed if you don't file information
returns by the due date; if you don't include
all required information; or if you report
inaccurate information;
- Failure
to Furnish Correct Payee Statements.
A penalty will be applied if you don't further
a required statement to a payee (employee)
by the required date; if you don't include
required information; or if you report inaccurate
information;
- Waiver
of Penalty. It is possible for the IRS
to waive the above penalties if you can
demonstrate that your failures were due
to a reasonable cause and not willful neglect.
In
order to avoid penalties for any of the failures
listed above, it is a good idea to have effective
procedures in place to meet your corporation's
tax obligations in a timely and accurate manner.
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