If you file your return within 6 months of the due date, but don't pay the tax due until after that date, your return will be subject to a late payment penalty. Like the late filing penalty, the late payment penalty applies at a rate of 6% per month, with a maximum penalty of 30%. The late payment penalty will not be imposed in any month for which a late filing penalty has been applied. In addition, the late payment penalty generally does not apply when an additional tax balance is calculated as a result of an audit of an income tax return that was submitted in good faith.
A return may be subject to both the late payment penalty and the extension penalty, as explained above. If you don't pay your taxes on time, you'll be charged interest and penalties in addition to the taxes you already owe. There are several red flags that should warn potential customers who are considering hiring a tax settlement firm. Most tax settlement firms promise to send their experts to the IRS to negotiate on behalf of the client, where they can presumably persuade the agency to accept a much smaller amount, often cents on the dollar.
The number of customers who get satisfaction from tax settlement companies is negligible, and most are practically in financial poverty. The vast majority of potential clients of settlement agreements need to develop payment plans with the IRS that allow them to settle their tax balances over time and, at the same time, preserve their assets and their dignity. If a taxpayer doesn't pay their real estate tax on time, charges (called “additions”) will be added to the principal amount of tax. In some cases, a tax provision in the settlement agreement that characterizes the payment may result in its exclusion from taxable income.
The civil penalty for filing a false or fraudulent return, or for failing to file or refusing to file a return with the intention of evading tax, is 100% of the correct tax. Known as tax settlement firms, these entities claim that they can dramatically reduce or eliminate what the customer owes to the IRS. The taxes due represented more than 10% of your total tax debt for the year, so the return is subject to an extension penalty during the months of May, June and part of July. If you file your return within 6 months of the original date, but the balance of taxes due with the return exceeds 10% of your total tax debt, the return will be subject to an extension penalty.
Compare that information with everything a tax settlement company tells you to make sure you've received the correct information before deciding whether or not to hire the company.