IRS highlights higher penalties for some tax returns filed after Sept. 14

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The Internal Revenue Service urged individuals who owe taxes but have not yet filed for 2019 to act now to avoid larger penalties that, by law, start after September 14.

The tax deadline was July 15 this year. Taxpayers who submitted an extension have until October 15 to file and do not face the failure to file penalty if they file their taxes by that deadline. But taxpayers need to remember that an extension to file is not an extension to pay. Any taxes they owed after the July 15 deadline are subject to the failure to pay penalty and interest.

Those taxpayers who didn't request an extension, and still owe taxes, face both the failure to file and the failure to pay penalties. They should file now and pay what they can before larger penalties take effect after September 14.

The penalty for not filing a federal tax return by the due date, or extended due date, is generally 5% of the unpaid tax for each month or part of a month that a tax return is late, up to 25% of the unpaid tax. However, if the return is more than 60 days late, a minimum penalty applies. If no return has been filed after 60 days, the minimum penalty that can be charged is $435 or 100% of the unpaid tax, whichever is less. This year, that important 60-day date occurs after Sept. 14. In addition to penalties, interest will also be charged on any tax not paid by the July 15 due date.

Remember, if a refund is due, no penalty is charged on the late return filed by a taxpayer.

IRS Free File is available on IRS.gov through October 15 to prepare and e-file a 2019 individual return.

Penalty relief may be available

Taxpayers who have not been assessed any penalties for the past three years often qualify to have penalties abated. A taxpayer who does not qualify for the first-time penalty relief may still qualify for penalty relief if their failure to file or pay on time was due to reasonable cause and not willful neglect. By law, interest cannot be abated.

Get more time to pay

There are options for taxpayers who owe but can't pay the full amount. Qualified taxpayers can choose to pay any taxes over time through a payment plan, including an installment agreement that can be set up in a matter of minutes on IRS.gov. A taxpayer's specific tax situation will determine which payment options are available. The IRS has more information for taxpayers who owe taxes, but cannot afford to pay the full amount.

Check withholding

To avoid surprises next year, taxpayers can use the IRS Tax Withholding Estimator to do a Paycheck Checkup to have the right amount of tax withheld during the year.

The IRS reminds taxpayers that unemployment compensation is generally taxable. To determine if unemployment is taxable, taxpayers can visit the Are Payments I Receive for Being Unemployed Taxable? tax tool at IRS.gov.

Taxpayers can choose to have federal income tax withheld from their unemployment payments. For more information, go to Form W-4V, Voluntary Withholding Request (PDF). Otherwise, taxpayers receiving unemployment benefits may be required to make quarterly estimated tax payments.

Source: IRS

Alfredo Gaxiola has worked on numerous IRS problem cases and has successfully settled with the IRS to release liens on houses, bank accounts and wages and, if needed, setting a payment installment plan that is not burdensome for the client. He has conducted appeals before the U.S. Tax Court and obtained favorable resolutions in reducing the tax debt of his clients. Mr. Gaxiola served as Treasurer of Camara de Empresarios Latinos, one of the largest and strongest Hispanic organizations in the city of Houston. He has conducted financial and accounting seminars for the Houston Small Business Development Corporation, as well.

IRS representation in Houston.

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