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Penalties for filing late with the IRS
Dear Dollar Diva,
I did not file my 2000 tax return and don't
know what to do. I do not owe the IRS; it owes me. Can I combine
the two years on my 2001 tax return? If not, and I file late, will
I have to pay a penalty?
Charles
Dear Charles,
Each tax year stands alone; you cannot combine 2000 and 2001 on
your 2001 Form
1040. You're going to request a refund for 2000, so don't procrastinate
-- file your 2000 Form 1040 now. If you miss the deadline (within
three years of having paid the tax), your request for a refund will
be denied. Uncle Sam didn't become the poster boy for "tough
love" for nothing.
But don't worry, you won't have to pay a penalty.
The rule is: If your tax return is filed more than 60 days after
it's due, the minimum penalty is the lesser of $100 or 100 percent
of the tax due.
Since the tax due on your return is nada, and that's
less than $100, your penalty for filing late is nada.
Interest and penalties
It's only when you file your tax return late, and there's tax due,
that you have to pay through the nose. The IRS's
interest rate isn't too bad. It's 7 percent until Dec. 31, 2001,
and gets redetermined every quarter. But the penalties are a different
story; they look, feel and taste like juice. Here's what errant
Form 1040 filers face when they don't follow Uncle Sam's rules:
- Late payment penalty:
One half of 1 percent of the tax due each month, up to 25 percent.
It can go up to 1 percent each month if you ignore Uncle Sam's
notices, and he decides to play hardball.
- Late filing penalty:
4.5 percent of the tax due each month, up to 22.5 percent.
Bottom line: filing and paying late can cost you a
whopping 47.5 percent, plus interest. Yikes. And don't think you
can dodge the bullet; the IRS will hunt you down single-mindedly.
Getting penalties waived
It's practically impossible to get taxing authorities to waive
interest, but if you can prove that you filed late due to "reasonable
cause" and not "willful neglect," the IRS should
waive the penalties.
You could have a case if your CPA or tax attorney
told you that you didn't have to file because there was no income
to report or you weren't liable for tax, and that turned out to
be bad advice.
You wouldn't have a case if you filed late because
you followed the advice of your barber or bug man.
It's not that easy to get penalties removed, but if
you believe you have a case, give it a shot; the worst thing the
IRS can say is "no."
-- Posted: Dec. 17, 2001
 DOROTHY
ROSEN has a master's degree in finance, with a specialization in
accounting, from the Kellogg Graduate School at Northwestern University
in Evanston, Ill. Rosen has more than 15 years of experience in
the financial arena, serving in Illinois and Florida as a certified
public accountant, financial consultant, expert witness and educator.
She is owner of Dorothy Rosen, CPA, a public accounting firm that
serves individuals and small businesses.
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