Monthly Archives: April 2011

IRS Tax Penalties

Filing & Owing is Better Than Not Filing & Owing

Owe Money to the IRS? Facing a Tax Audit or Tax Debt of 20K+. Speak to a Tax Specialist Now

Mileage Reimbursement Vehicle Reimbursement Strategies to Cut Company Mileage Expenses

File a Tax Extension File Online with IRS in minutes. Get a 6-month Tax

If you owe taxes, the Internal Revenue Service will calculate penalties and interest on the amount owed. If you have a refund, the IRS may pay you interest on the delayed refund. (Note the difference between “will” and “may” – the IRS generally pays interest on refunds that have been delayed because of slow processing by the IRS. Since most late tax returns take longer to process, the IRS “may” pay you interest on based on the extra amount of time it takes them to process your return.) If you have a refund, there is no penalty for filing late. Penalties are calculated on the amount due. Since there is no amount due, there is no penalty.If you have a balance due on a late tax return, the IRS will calculate additional penalties and interest. There are three separate penalties:

  • Failure to File Penalty
  • Failure to Pay Penalty
  • Interest

Each is calculated differently. Let’s take a look at each one. Failure to File Penalty

The failure-to-file penalty is calculated based on the time from the deadline of your tax return (including extensions) to the date you actually filed your tax return. The penalty is 5% for each month the tax return is late, up to a total maximum penalty of 25%. The percentage is of the tax due as shown on the tax return. If your tax return is more than five months late, simply multiply your balance due by 25% to calculate your failure to file penalty. Failure to Pay Penalty

The failure-to-pay penalty is calculated based on the amount of tax you owe. The penalty is 0.5% for each month the tax is not paid in full. There is no maximum limit to the failure-to-pay penalty. The penalty is calculated from the original payment deadline (the original April 15th filing deadline) until the balance due is paid in full. 

Interest is calculated based on how much tax you owe. Interest rates change every three months. Currently, the IRS interest rate for underpayment of tax is 4% per year. The interest is calculated for each day your balance due is not paid in full.IRS interest rates are variable and are set quarterly. For historical IRS interest rates, see this chart at

 Action Plan Items

There’s a lesson to be learned by looking at the penalties. If you owe, it is better to file sooner rather than later. Also, if it looks like you are going to be a few months late on your next tax return, file an extension. By filing an extension you may reduce or eliminate the Failure to File Penalty.

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Posted by on April 21, 2011 in Tax Relief


Answers for your most common tax questions.

Tax Resources on the Web

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Posted by on April 11, 2011 in Tax Relief


Looking for your federal tax refund…click link below.

Where’s My Refund – It’s Quick, Easy, and Secure.


Where's My Refund? En Español







Go to the Where’s My Refund? online tool to track your refund.

Where’s My Refund? will usually have information about your refund 72 hours after IRS acknowledges receipt of your e-filed return, or three to four weeks after mailing a paper return. Check back weekly, on Wednesdays, for any updates to your refund information.



Don’t fall for scams about your refund! Learn how to protect your personal information


For details about what’s available on Where’s My Refund?, please see About Where’s My Refund.

If you have trouble while using this online tool, please see our Browser Requirements and check to make sure our system is available.


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Posted by on April 11, 2011 in Tax Relief


Tax Types

Taxes for Business Types

All the taxes paid by each business type – sole proprietorship, limited liability company, partnership, or corporation. Income taxes (federal and state), self-employment taxes, sales and use taxes, and payroll taxes are included.



Social Security Tax – Annual Maximum Social Security Tax

The Social Security tax is a federal tax imposed on employers, employees and self-employed individuals. It is used to pay the cost of benefits for elderly recipients, survivors of recipients, and disabled individuals (OASDI Insurance). Social Security tax is one of the payroll taxes paid by employees, employers, and self-employed individuals each year.

The Social Security tax rate is 12.4 percent; 6.2 percent is withheld from each of the employer and employee, while the full 12.4 percent is paid by self-employed individuals.

Social Security taxes are withheld up to a maximum amount, which changes each year. Here are the maximum wages subject to Social Security for the past few years:


  • Thus, the maximum OASDI tax payable for 2009,2010, and 2011 is $13,432. The term “Social Security tax” or “OASDI” is often confused with “FICA taxes,” which include both Social Security and Medicare taxes. The Medicare tax rate is 1.45 percent for both employers and employees, with the self-employed Medicare rate at 3.3 percent.


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Posted by on April 4, 2011 in Tax Relief


Tax Relief Act and Payroll Changes

Tax Relief Act and Payroll Changes – Including W-4 and Withholding

Several provisions of the Tax Relief, Unemployment Insurance Continuation and Job Creation Act of 2010 will change how your process payroll in 2011.  As William Perez, Guide to Tax Planning reports, this tinkering with withholding rates by the IRS is the result of changes to Making Work Pay, which has been eliminated, and other changes in the tax code. Here are the details: Employee Social Security Tax  Reduced 2% in 2011. In attempt to boost taxpayer income – and thus encourage spending – the new includes a 2% reduction in the employee portion for the Social Security part of FICA taxes.  For an employee earning $50,000 in gross income, this means an additional $1,000 available in 2011.  This cut in Social Security tax is only effective for 2011 (unless it’s extended). New Withholding Tables for 2011In response to the new tax law, the IRS has made changes to withholding tables for 2011.  You can download IRS Notice 1036, which provides more details on the percentage method for income tax withholding.Employee Changes to W-4 FormsAlthough employees don’t have to make changes to their withholding, this might be a good time to contact all your employees and remind them to check their W-4 form for changes in filing status, marital status, or additional deductions to avoid underpayment.You can help employees make changes in their W-4 forms by providing them with this link to the IRS withholding calculator. Employees can also refer to IRS Publication 919 for more information on how to change their withholding allowances. Adjusting Payroll Tax Withholding in 2011. To reflect the new 2% reduction in Social Security taxes, you will need to change your payroll deductions for employees by this amount.  You should make these changes as soon as possible, but no later than January 31, 2011.  If you don’t get the changes made immediately, you will need to make an adjustment in worker pay to reflect the over-payment.  The IRS says the adjustment should be made no later than March 31, 2011.For example, if you were not able to make the adjustment with the first paycheck in January, the 2% overpayment would need to be refunded to employees in a later paycheck. Remember:1. You must reduce the amount you withhold from employee paychecks by 2% for the Social Security portion of FICA taxes.2. The Social Security maximum taxable income amount for 2011 hasn’t changed (it’s still $106,800), so some employees may reach this maximum sooner.3. The employer portion of FICA taxes is not reduced by 2%.4. New withholding tables are in effect for 2011.  You can see the tables in IRS Notice 1036, or get them from your payroll service.
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Posted by on April 4, 2011 in Tax Relief