Client IRS FAQs
IRS Stimulus Payments
If you think your stimulus check may be lost in the mail, was never sent, or you are not sure if you qualify, we recommend you check out the IRS website: Economic Payment Information Center and/or check out IRS Refund Inquiries. As another option, you can call the IRS (1-267-941-1000, options 1, 4 and 2) to speak with an agent.
Otherwise, you may have to file a 2020 tax return in order to request stimulus payments as a refund. Technically, the payments were an “advance rebate” for 2020 returns. This means that if you didn’t receive the payment during the 2020 calendar year, it will be claimed as a refund on your 2020 tax return.
IRS Estimated Taxes
We will do our best to provide estimated tax payment vouchers for the upcoming year. However, it is the client’s responsibility to make timely and equal estimated payments throughout the year if estimates are due. Most business owners, and other individuals with taxes due from the prior year, likely have quarterly estimated payment obligations. Please consult IRS Estimated Taxes Guidance for further information on rules, penalties and exceptions.
IRS Failure to Pay Penalty
FAILURE TO PAY PENALTY: When you do not pay your tax on time, you are subject to the Failure to Pay penalty. The failure to pay penalty equals 0.5 percent of the amount of the tax if the failure extends no longer than a month, with an additional 0.5 percent per month (or fraction of a month) to a maximum of 25 percent. In the case of the failure to pay tax shown on the return, the penalty is imposed on the amount shown on the return less amounts that have been withheld, estimated tax payments, partial payments and other applicable credits.
For example, if your tax liability is $1,000 and it is paid within one month after the due date of the return, the penalty would be $5. If the amount is not paid for 6 months, the penalty would be $30.
IRS Failure to File Penalty
Starting point is 5% of unpaid tax, with a reduction if failure to pay is also in effect. Penalty is charged up to 5 months. Further information on general penalties and interest assessed by the IRS is published here.
Interest begins to run from the tax due date. As interest accrues, it compounds daily. It stops accruing when the IRS receives the taxpayer’s payment.
The rate that interest accrues is the federal short-term rate, increased by three percentage points. This rate applies to underpayments and to most unpaid penalties. Each quarter, the IRS publishes the underpayment interest rate.
With respect to a failure to file penalty, accuracy-related penalty, and civil fraud penalty, interest accrues from the due date of the underlying return (including extensions) until the date the penalty is paid.
Extending the time to file a return or pay a tax does not extend the tax due date. While expats are given automatic time to file by June 15th, any tax owed is still due by April 15th (and could start accruing interest after that date, but no late penalties).
If you require any further information or assistance, don’t hesitate to contact your Bright!Tax CPA.