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3 Tips for minimizing tax penalties

The tax filing date for most taxpayers was April 18. If you weren’t able to get your tax return filed or in the mail, you can reduce penalties by following a few tips.

You need to realize that there are two tax penalties. One is for failing to file on time and it is the more serious. The other is for failing to pay your tax bill by the deadline. When combined they can add five percent to your balance each month. If you are more than 60 days late in filing your return the minimum penalty is $205 or 100 percent the balance if you owe less than $205.

Keeping the penalties at a minimum

The first tip is to file your tax return as soon as possible. If there is some reason that you do not have all the information that you need to file, speak with a tax attorney about extension options and whether to file and later amend. This will limit the more costly failure to file penalty.

A second tip is to pay as much as you can. If you pay 90 percent of the balance owed, you can avoid the failure-to-pay penalty altogether. You may want to explore setting up a payment plan. The fees are often minimal especially if you set up a direct debit from an account.

Third, when you have a reasonable cause for failing to file you may avoid penalties. If heavy rainfall flooded your basement where you stored all your paperwork, the IRS might allow you more time to get your taxes in order.

Tax problems can quickly escalate when ignored. Open the letters from the IRS and seek counsel from a tax attorney to find a solution to past problems and to avoid future ones.

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