August is the perfect time for individuals and corporations to put their records in order and file their 2015 tax returns which are due September 15th or October 15th. Presumably they have requested an extension to file and have paid the tax due.

Taxpayers who are not filing on time might be subject to a “failure to file” penalty of 5% of the tax not paid by the due date. The penalty is usually 5% for each month or part of a month that a return is late, but not more than 25%.

What if you can’t? Will you be subject to penalty?

Most certainly…However, there is a program designed as a ‘one time’ option called the “First Time Abatement” for taxpayers who have filed all prior required returns with no balance outstanding, made payments against balance due in the prior two years and have three years prior with no failure to file or failure to pay. And, the failure to file was due to reasonable causes and not willful neglect.

Reasonable causes include:

  • Death, serious illness or unavoidable absence
  • Fire, casualty, or natural disaster
  • Unable to obtain records
  • Taxpayer relied on erroneous advice on technical, complicated issue
  • Taxpayer relied on written or oral advice from the IRS
  • Taxpayer was ignorant of the law
  • Taxpayer endures undue financial hardship

“Negligence” includes a failure to make a reasonable attempt to comply with the tax law or to exercise ordinary and reasonable care in preparing a return. It also includes failure to keep adequate books and records.

I created this blog to help understand certain basic aspects of U.S. tax law. Of course, each situation is unique and nothing that is on this site will ever replace the expert advice of a tax professional.

Please do not hesitate to contact me should you have any question