This is an online database used to search for simplified answers to difficult tax and accounting questions. Including tax law changes and articles for browsing. AFSG BLOG – The Accounting Offices of Lauryn Charles
RSS | Comments RSS

Archive for the ‘Penalties and Interest’ Category

Individual Income Tax, Penalties and Interest, Tax Payments

Eleven Tips for Taxpayers Who Owe Money to the IRS

Comments (0)
August 6, 2012 at 8:55 am

Most taxpayers get a refund from the Internal Revenue Service when they file their tax returns. For those who don’t get a refund, the IRS offers several options to pay their tax bill.

Here are eleven tips for taxpayers who owe money to the IRS.

1. Tax bill payments If you get a bill from the IRS this summer that shows you owe late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it may be better for you to get a loan to pay the bill in full rather than to make installment payments to the IRS. That’s because the interest rate and penalties the IRS must charge by law are often higher than what lending institutions may be offering.

2. Electronic Funds Transfer You can pay your tax bill by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer, use the Electronic Federal Tax Payment System by either calling 800-555-4477 or using the online access at www.eftps.gov.

3. Credit card payments You can pay your bill with a credit card. Again, the interest rate on a credit card may be lower than the combination of interest and penalties the IRS must charge. To pay by credit card contact one of the following processing companies:

– WorldPay US, Inc. at 888-9PAY-TAX (or www.payUSAtax.com),

– Official Payments Corporation at 888-UPAY-TAX (or www.officialpayments.com/fed), or

– Link2Gov Corporation at 888-PAY-1040 (or www.pay1040.com).

4. Additional time to pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. There generally is no set up fee for a short-term agreement.

5. Installment Agreement You may request an installment agreement if you cannot pay the total tax you owe in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all required returns and be current with estimated tax payments.

6. Apply Using Form 9465 You can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill using the envelope you received from the IRS. The IRS will inform you (usually within 30 days) whether your request is approved, denied, or if additional information is needed.

7. Apply Using Online Payment Agreement If you owe $50,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov. You may still qualify for an installment agreement if you owe more than $50,000, but you are required to complete a Form 433F, Collection Information Statement, before the IRS will consider an installment agreement.

8. User fees If an installment agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with lower incomes, the fee can be reduced to $43.

9. Offer in Compromise IRS is now offering more flexible terms with its Offer-in-Compromise (OIC) Program. An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed. An OIC is generally accepted only if the IRS believes, after assessing the taxpayer’s financial situation, that the tax debt can’t be paid in full as a lump sum or through a payment agreement.

10. Check withholding Taxpayers who have a balance due may want to consider changing their Form W-4, Employee’s Withholding Allowance Certificate, with their employer.

11. Fresh Start The IRS has a program to help struggling taxpayers get a fresh start. Through the Fresh Start program, individuals and small businesses may be able to pay the taxes they owe without facing additional or unnecessary burden.

For more information about payment options or IRS’s Fresh Start program, visit IRS.gov. IRS Publications 594, The IRS Collection Process, and 966, Electronic Choices to Pay All Your Federal Taxes, also provide additional information regarding your payment options. These publications and Forms 9465 and W-4 can be obtained from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Source: IRS.gov

Individual Income Tax, Penalties and Interest, Tax Payments

Tips for Taxpayers Who Can’t Pay Their Taxes on Time

Comments (0)
April 3, 2012 at 9:22 am
Source: irs.gov
IRS Tax Tip 2012-64

If you owe tax with your federal tax return, but can’t afford to pay it all when you file, the IRS wants you to know your options and help you keep interest and penalties to a minimum.

Here are five tips:

1. File your return on time and pay as much as you can with the return. These steps will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges. For electronic and credit card options for paying see IRS.gov. You may also mail a check payable to the United States Treasury

2. Consider obtaining a loan or paying by credit card. The interest rate and fees charged by a bank or credit card company may be lower than interest and penalties imposed by the Internal Revenue Code.

3. Request an installment payment agreement. You do not need to wait for IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include:
• Using the Online Payment Agreement application and
• Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return
IRS charges a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.

4. Request an extension of time to pay. For tax year 2011, qualifying individuals may request an extension of time to pay and have the late payment penalty waived as part of the IRS Fresh Start Initiative. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012.

5. If you receive a bill from the IRS, please contact us immediately to discuss these and other payment options. Ignoring the bill will only compound your problem and could lead to IRS collection action.

If you can’t pay in full and on time, the key to minimizing your penalty and interest charges is to pay as much as possible by the tax deadline and the balance as soon as you can. For more information on the IRS collection process go to or see IRSVideos.gov/OweTaxes.

Corporate Income Tax, Individual Income Tax, Penalties and Interest, Tax Payments

Eight Facts on Penalties

Comments (0)
February 10, 2011 at 1:02 am

Source: IRS.gov

When it comes to filing a tax return – or not filing one – the IRS can assess a penalty if you fail to file, fail to pay or both. Here are eight important points the IRS wants you to know about the two different penalties you may face if you do not file or pay timely.

1.     If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.

2.     The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and explore other payment options in the meantime. The IRS will work with you.

3.     The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.

4.     If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

5.     If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

6.     If you timely filed a request for an extension of time to file and you paid at least 90 percent of your actual tax liability by the original due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.

7.     If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

8.     You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.
Link: Avoiding Penalties and the Tax Gap

Corporate Income Tax, Penalties and Interest, State Taxes

Florida’s Late Fees Remain at 7 Percent

Comments (0)
June 12, 2010 at 8:54 am

Floating Rate of Interest for Most Taxes and Fees Will
Remain 7 Percent
For the Period July 1, 2010, Through December 31, 2010

Florida law provides a floating rate of interest on payments of taxes and fees due on or after January 1, 2000. This floating rate of interest applies to:
• Deficiencies (underpayments)
• Late payments
• Overpayments (Generally, interest begins to accrue on the 91st day after the Department receives a complete refund application. Interest may not exceed 11 percent.)

The rate applies to the taxes and fees listed in section 213.05, Florida Statutes, including but not limited to the following:
• Communications services tax
• Corporate income/franchise and emergency excise taxes
• Motor fuel and diesel fuel taxes
• Documentary stamp taxes (including surtaxes)
• Sales and use taxes (including discretionary sales surtaxes)
Other taxes and fees that this provision applies to are listed at the end of this document.

Interest Rates
The rate of interest for the period July 1, 2010, through December 31, 2010, is 7 percent. The daily interest rate factor to be used for this period is .000191781. This rate is subject to change effective January 1, 2011.

See: https://taxlaw.state.fl.us/wordfiles/CIT%20TIP%2010ADM-01.pdf for daily factors and more information.

Source: Florida Department of Revenue, http://dor.myflorida.com/dor/

Floating Rate of Interest for Most Taxes and Fees Will
Remain 7 Percent
For the Period July 1, 2010, Through December 31, 2010
Florida law provides a floating rate of interest on payments of taxes and fees due on or after January 1, 2000. This floating rate of interest applies to:
• Deficiencies (underpayments)
• Late payments
• Overpayments (Generally, interest begins to accrue on the 91st day after the Department receives a complete refund application. Interest may not exceed 11 percent.)
The rate applies to the taxes and fees listed in section 213.05, Florida Statutes, including but not limited to the following:
• Communications services tax
• Corporate income/franchise and emergency excise taxes
• Motor fuel and diesel fuel taxes
• Documentary stamp taxes (including surtaxes)
• Sales and use taxes (including discretionary sales surtaxes)
Other taxes and fees that this provision applies to are listed at the end of this document.
Interest Rates
The rate of interest for the period July 1, 2010, through December 31, 2010, is 7 percent. The daily interest rate factor to be used for this period is .000191781. This rate is subject to change effective
January 1, 2011.
The floating rates of interest for deficiencies (underpayments) and late payments of tax due after
December 31, 2004, are:
Interest Periods
Rates on Deficiencies (Underpayments) & Late Payments *
Daily Factor
01/01/05 – 06/30/05
8 percent
.000219178
07/01/05 – 12/31/05
9 percent
.000246575
01/01/06 – 06/30/06
10 percent
.000273973
07/01/06 – 12/31/06
11 percent
.000301370
01/01/07 – 12/31/07
12 percent
.000328767
01/01/08 – 06/30/08
12 percent
.000327869
07/01/08 – 12/31/08
11 percent
.000300546
01/01/09 – 06/30/09
9 percent
.000246575
07/01/09 – 12/31/09
8 percent
.000219178
01/01/10 – 12/31/10
7 percent
.000191781
*NOTE: Rates may not exceed 12 percent.
The floating rates of interest for overpayments of tax made after December 31, 2004, are:
Interest Periods
Rates on Overpayments**
Daily Factor
01/01/05 – 06/30/05
8 percent
.000219178
07/01/05 – 12/31/05
9 percent
.000246575
01/01/06 – 06/30/06
10 percent
.000273973
07/01/06 – 12/31/07
11 percent
.000301370
01/01/08 – 12/31/08
11 percent
.000300546
01/01/09 – 06/30/09
9 percent
.000246575
07/01/09 – 12/31/09
8 percent
.000219178
01/01/10 – 12/31/10
7 percent
.000191781
**NOTES:
• The rate of interest on overpayments may not exceed 11 percent except for corporate income tax. The rate of interest on overpayments of corporate income tax is 12 percent for the period January 1, 2007, through June 30, 2008.
• See TIP 06ADM-03 for the rates of interest for the periods between December 31, 1999, and January 1, 2005. For returns or payments due on or before December 31, 1999, the interest rate is 12 percent per annum, except for corporate income and emergency excise taxes.
• The floating rate of interest on corporate income tax and emergency excise tax was effective for taxable years ending on or after December 31, 1986. The following table is applicable for corporate income tax and emergency excise tax due on or before December 31, 1999.
Interest Periods
Corporate Income Tax
Rates for Taxable Years Ending on or after December 31, 1986, and Deficiencies Due on or before December 31, 1999***
Daily Factor
01/01/04 – 12/31/04
4 percent
.000109290
01/01/05 – 06/30/05
4 percent
.000109589
07/01/05 – 12/31/05
5 percent
.000136986
01/01/06 – 06/30/06
6 percent
.000164384
07/01/06 – 12/31/06
7 percent
.000191781
01/01/07 – 12/31/07
8 percent
.000219178
01/01/08 – 06/30/08
8 percent
.000218579
07/01/08 – 12/31/08
7 percent
.000191257
01/01/09 – 06/30/09
5 percent
.000136986
07/01/09 – 12/31/09
4 percent
.000109589
01/01/10 – 12/31/10
3 percent
.000082192
***NOTE: See TIP 03C01-02R for earlier years.
For examples on calculating underpayments, late payments, or overpayments of tax due, see
TIP 99ADM-03.
To obtain the referenced TIPs see “For More Information” section below.
Additional taxes and fees to which the interest provision applies:
• Aviation fuel taxes
• Estate tax
• Gross receipts tax on utility services
• Gross receipts tax on dry cleaning facilities
• Insurance premium tax and related taxes and levies
• Intangible personal property taxes
• Lead-acid battery and waste tire fees
• Local option convention development taxes
• Local option tourist development and tourist impact taxes
• Local option food and beverage taxes
• Miami-Dade County Lake Belt Area fees
• Motor vehicle warranty fees
• Pollutants taxes
• Registration of secondhand dealers and secondary metals recyclers
• Rental car surcharge fees
• Severance taxes
This interest provision does not apply to unemployment tax. The interest rate on deficiencies remains at
1 percent per month, or any part of a month. No interest is paid on refunds of unemployment tax, penalties, or interest.
References: Sections 213.235, 213.255, and 443.141, Florida Statutes (2009); Chapter 2003-395, Laws of Florida; (CS for Senate Bill 18A, 2003 Special Session A); Rules 12C-1.343 and 12-3.0015, Florida Administrative Code
Audits, Employees & Independent Contractors, Payroll, Penalties and Interest

How to Avoid IRS Payroll Audits

Comments (0)
March 19, 2010 at 2:51 pm

Important: The IRS recently published an article regarding if a person is an employee or contractor. In a nutshell, it is crucial you know the difference. If a business considers an employee a contractor, a good rule of thumb is that the IRS is going to levy a penalty of 30% of the amount you paid that person. This is a lot of money!

Another growing trend for 2010 is that the IRS will be conducting payroll tax audits. Basically, they are looking to make sure each company is paying the correct amount of employment taxes to employees and especially to S-Corporation owners who provide a service to the business.
—————-

Employee vs. Independent Contractor – Ten Tips for Business Owners
If you are a small business owner, whether you hire people as independent contractors or as employees will impact how much taxes you pay and the amount of taxes you withhold from their paychecks. Additionally, it will affect how much additional cost your business must bear, what documents and information they must provide to you, and what tax documents you must give to them.

Here are the top ten things every business owner should know about hiring people as independent contractors versus hiring them as employees.

1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship.

2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.

3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.

4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.

6. If you can direct or control only the result of the work done — and not the means and methods of accomplishing the result — then your workers are probably independent contractors.

7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.

8. Workers can avoid higher tax bills and lost benefits if they know their proper status.

9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding – with the IRS.

10. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link.  Additional resources include IRS Publication 15-A, Employer’s Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).

source: www.irs.gov

Copyright 2010 Accountable Financial Services Group Inc 954-933-1558 | Powered by WordPress | Businesso v1.0.2 by noonnoo | Log in