Penalties
The law provides penalties for failure to file returns or pay taxes as required.
Civil Penalties
If you do not file your return and pay your tax by the due date, you may have to pay a penalty. You may also have to pay a penalty if you
substantially understate your tax, file a frivolous return, or fail to supply your social security number. If you provide fraudulent information on
your return, you may have to pay a civil fraud penalty.
Filing late.
If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty. The penalty is
based on the tax not paid by the due date (without regard to extensions). The penalty is usually 5% for each month or part of a month that a return is
late, but not more than 25%.
Fraud.
If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%.
Return over 60 days late.
If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $100 or 100% of the unpaid
tax.
Exception.
You will not have to pay the penalty if you show that you failed to file on time because of reasonable cause and not because of willful neglect.
Paying tax late.
You will have to pay a failure-to-pay penalty of ½ of 1% (.50%) of your unpaid taxes for each month, or part of a month,
after the due date that the tax is not paid. This penalty does not apply during the automatic 4-month extension of time to file period, if you paid at
least 90% of your actual tax liability on or before the due date of your return and pay the balance when you file the return.
The monthly rate of the failure-to-pay penalty is half the usual rate (.25% instead of .50%) if an installment agreement is in effect for that
month. You must have filed your return by the due date (including extensions) to qualify for this reduced penalty.
If a notice of intent to levy is issued, the rate will increase to 1% at the start of the first month beginning at least 10 days after the day that
the notice is issued. If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning
after the day that the notice and demand is issued.
This penalty cannot be more than 25% of your unpaid tax. You will not have to pay the penalty if you can show that you had a good reason for not
paying your tax on time.
Combined penalties.
If both the failure-to-file penalty and the failure-to-pay penalty (discussed earlier) apply in any month, the 5% (or 15%) failure-to-file penalty
is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum
penalty is the smaller of $100 or 100% of the unpaid tax.
Accuracy-related penalty.
You may have to pay an accuracy-related penalty if:
- You underpay your tax because of either negligence or disregard of rules or regulations, or
- You substantially understate your income tax.
The penalty is equal to 20% of the underpayment. The penalty will not be figured on any part of an underpayment on which the fraud penalty
(discussed later) is charged.
Negligence or disregard.
The term 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. Negligence also includes failure to keep adequate books and records. You will not have to pay a negligence penalty if you have
a reasonable basis for a position you took.
The term disregard includes any careless, reckless, or intentional disregard.
Adequate disclosure.
You can avoid the penalty for disregard of rules or regulations if you adequately disclose on your return a position that has at least a reasonable
basis. See Disclosure statement, later.
Substantial understatement of income tax.
You understate your tax if the tax shown on your return is less than the correct tax. The understatement is substantial if it is more than the
larger of 10% of the correct tax or $5,000. However, the amount of the understatement is reduced to the extent the understatement is due to:
- Substantial authority, or
- Adequate disclosure and a reasonable basis.
Substantial authority.
Whether there is or was substantial authority for the tax treatment of an item depends on the facts and circumstances. Consideration will be given
to court opinions, Treasury regulations, revenue rulings, revenue procedures, and notices and announcements issued by the IRS and published in the
Internal Revenue Bulletin that involve the same or similar circumstances as yours.
Disclosure statement.
To adequately disclose the relevant facts about your tax treatment of an item, use
Form 8275, Disclosure Statement. You must also have a reasonable basis for treating the item the
way you did.
In cases of substantial understatement only, items that meet the requirements of Revenue Procedure 2002-66 (or later update) are considered
adequately disclosed on your return without filing Form 8275.
Use Form 8275-R, Regulation Disclosure Statement, to disclose items or positions contrary to regulations.
Reasonable cause.
You will not have to pay a penalty if you show a good reason (reasonable cause) for the way you treated an item. You must also show that you acted
in good faith.
Frivolous return.
You may have to pay a penalty of $500 if you file a frivolous return. A frivolous return is one that does not include enough information to figure
the correct tax or that contains information clearly showing that the tax you reported is substantially incorrect.
You will have to pay the penalty if you filed this kind of return because of a frivolous position on your part or a desire to delay or interfere
with the administration of federal income tax laws. This includes altering or striking out the preprinted language above the space provided for your
signature.
This penalty is added to any other penalty provided by law.
The penalty must be paid in full upon notice and demand from IRS even if you protest the penalty.
Fraud.
If there is any underpayment of tax on your return due to fraud, a penalty of 75% of the underpayment due to fraud will be added to your tax.
Joint return.
The fraud penalty on a joint return does not apply to a spouse unless some part of the underpayment is due to the fraud of that spouse.
Failure to supply social security number.
If you do not include your social security number (SSN) or the SSN of another person where required on a return, statement, or other document, you
will be subject to a penalty of $50 for each failure. You will also be subject to a penalty of $50 if you do not give your SSN to another
person when it is required on a return, statement, or other document.
For example, if you have a bank account that earns interest, you must give your SSN to the bank. The number must be shown on the Form
1099-INT or other statement the bank sends you. If you do not give the bank your SSN, you will be subject to the $50 penalty. (You also may be
subject to backup withholding of income tax. See chapter 5.)
You will not have to pay the penalty if you are able to show that the failure was due to reasonable cause and not willful neglect.
Failure to furnish tax shelter registration number.
A person who sells (or otherwise transfers) to you an interest in a tax shelter must give you the tax shelter registration number or be subject to
a $100 penalty. If you claim any deduction, credit, or other tax benefit because of the tax shelter, you must attach
Form 8271, Investor Reporting of Tax Shelter Registration Number, to your return to report this
number. You will have to pay a penalty of $250 for each failure to report a tax shelter registration number on your return. The penalty can be excused
if you have a reasonable cause for not reporting the number.
Criminal Penalties
You may be subject to criminal prosecution (brought to trial) for actions such as:
- Tax evasion,
- Willful failure to file a return, supply information, or pay any tax due,
- Fraud and false statements, or
- Preparing and filing a fraudulent return.
Filing Status
Introduction
This chapter helps you determine which filing status to use. There are five filing statuses:
- Single,
- Married Filing Jointly,
- Married Filing Separately,
- Head of Household, and
- Qualifying Widow(er) With Dependent Child.
If more than one filing status applies to you, choose the one that will give you the lowest tax.
You must determine your filing status before you can determine your filing requirements (chapter 1), standard deduction (chapter 21), and correct
tax (chapter 31). You also use your filing status in determining whether you are eligible to claim certain deductions and credits.
Useful Items You may want to see:
Publication
- 501
Exemptions, Standard Deduction, and Filing Information
- 519
U.S. Tax Guide for Aliens
- 555
Community Property
Marital Status
In general, your filing status depends on whether you are considered unmarried or married. A marriage means only a legal union between a man and a
woman as husband and wife.
Unmarried persons.
You are considered unmarried for the whole year if, on the last day of your tax year, you are unmarried or legally separated from your spouse under
a divorce or a separate maintenance decree. State law governs whether you are married or legally separated under a divorce or separate maintenance
decree.
Divorced persons.
If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year.
Divorce and remarriage.
If you obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intended to
and did remarry each other in the next tax year, you and your spouse must file as married individuals.
Annulled marriages.
If you obtain a court decree of annulment, which holds that no valid marriage ever existed, you are considered unmarried even if you filed joint
returns for earlier years. You must file amended returns (Form 1040X, Amended U.S. Individual Income Tax Return) claiming single or head of
household status for all tax years affected by the annulment that are not closed by the statute of limitations for filing a tax return. The statute of
limitations generally does not expire until 3 years after your original return was filed.
Head of household or qualifying widow(er) with dependent child.
If you are considered unmarried, you may be able to file as a head of household or as a qualifying widow(er) with a dependent child. See Head
of Household and Qualifying Widow(er) With Dependent Child to see if you qualify.
Married persons.
If you are considered married for the whole year, you and your spouse can file a joint return, or you can file separate returns.
Considered married.
You are considered married for the whole year if on the last day of your tax year you and your spouse meet any one of the following tests.
- You are married and living together as husband and wife.
- You are living together in a
common law marriage that is recognized in the state where you now live or in the state where the
common law marriage began.
- You are married and living apart, but not legally separated under a decree of divorce or separate maintenance.
- You are separated under an interlocutory (not final) decree of divorce. For purposes of filing a joint return, you are not considered
divorced.
Spouse died.
If your spouse died during the year, you are considered married for the whole year for filing status purposes.
If you did not remarry before the end of the tax year, you can file a joint return for yourself and your deceased spouse. For the next 2 years, you
may be entitled to the special benefits described later under Qualifying Widow(er) With Dependent Child.
If you remarried before the end of the tax year, you can file a joint return with your new spouse. Your deceased spouse's filing status is married
filing separately for that year.
Married persons living apart.
If you live apart from your spouse and meet certain tests, you may be considered unmarried. If this applies to you, you can file as head
of household even though you are not divorced or legally separated. If you qualify to file as head of household instead of as married filing
separately, your standard deduction will be higher. Also, your tax may be lower, and you may be able to claim the earned income credit. See Head
of Household, later.
Single
Your filing status is single if, on the last day of the year, you are unmarried or legally separated from your spouse under a divorce or
separate maintenance decree, and you do not qualify for another filing status. To determine your marital status on the last day of the year, see
Marital Status, earlier.
Your filing status may be single if you were widowed before January 1, 2002, and did not remarry in 2002. However, you might be able to use another
filing status that will give you a lower tax. See Head of Household and Qualifying Widow(er) With Dependent Child to see if you
qualify.
How to file.
You can file Form 1040EZ (if you have no dependents, are under 65 and not blind, and meet other requirements), Form 1040A, or Form 1040. If you
file Form 1040A or Form 1040, show your filing status as single by checking the box on line 1. Use the Single column of the Tax Table or
Schedule X of the Tax Rate Schedules to figure your tax.
Married Filing Jointly
You can choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint
return. On a joint return, you report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you
had no income or deductions.
If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your
standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses.
If you and your spouse each have income, you may want to figure your tax both on a joint return and on separate returns (using the filing status of
married filing separately). Choose the method that gives the two of you the lower combined tax.
How to file.
If you file as married filing jointly, you can use Form 1040 or Form 1040A. If you have no dependents, are under 65 and not blind, and meet other
requirements, you can file Form 1040EZ. If you file Form 1040 or Form 1040A, show this filing status by checking the box on line 2. Use the
Married filing jointly column of the Tax Table or Schedule Y-1 of the Tax Rate Schedules to figure your tax.
Spouse died during the year.
If your spouse died during the year, you are considered married for the whole year and can choose married filing jointly as your filing status. See
Spouse died, earlier, for more information.
Divorced persons.
If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year and you cannot choose married
filing jointly as your filing status.
Filing a Joint Return
Both you and your spouse must include all of your income, exemptions, and deductions on your joint return.
Accounting period.
Both of you must use the same accounting period, but you can use different accounting methods. See Accounting Periods and
Accounting Methods in chapter 1.
Joint responsibility.
Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be
held responsible for all the tax due even if all the income was earned by the other spouse.
Divorced taxpayer.
You may be held jointly and individually responsible for any tax, interest, and penalties due on a joint return filed before your divorce. This
responsibility may apply even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint
returns.
Relief from joint liability.
In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that
were incorrectly reported on the joint return. You can ask for relief no matter how small the liability.
There are three types of relief available.
- Innocent spouse relief, which applies to all joint filers.
- Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or have not lived together
for the 12 months ending the date election of this relief is filed.
- Equitable relief, which applies to all joint filers who do not qualify for innocent spouse relief or separation of liability and
to married couples filing separate returns in community property states.
You must file Form 8857, Request for Innocent Spouse Relief, to request any of these kinds of relief. Publication 971, Innocent
Spouse Relief, explains these kinds of relief and who may qualify for them.
Signing a joint return.
For a return to be considered a joint return, both husband and wife must generally sign the return. If your spouse died before signing the return,
see Signing the return in chapter 4.
Spouse away from home.
If your spouse is away from home, you should prepare the return, sign it, and send it to your spouse to sign so that it can be filed on time.
Injury or disease prevents signing.
If your spouse cannot sign because of disease or injury and tells you to sign, you can sign your spouse's name in the proper space on the return
followed by the words By (your name), Husband (or Wife). Be sure to also sign in the space provided for your signature. Attach a dated
statement, signed by you, to the return. The statement should include the form number of the return you are filing, the tax year, the reason your
spouse cannot sign, and a statement that your spouse has agreed to your signing for him or her.
Signing as guardian of spouse.
If you are the guardian of your spouse who is mentally incompetent, you can sign the return for your spouse as guardian.
Spouse in combat zone.
If your spouse is unable to sign the return because he or she is serving in a combat zone (such as the Persian Gulf Area, Yugoslavia, or
Afghanistan), or a qualified hazardous duty area (Bosnia and Herzegovina, Croatia, and Macedonia), and you do not have a power of attorney or other
statement, you can sign for your spouse. Attach a signed statement to your return that explains that your spouse is serving in a combat zone. For more
information on special tax rules for persons who are serving in a combat zone, or who are in missing status as a result of serving in a combat zone,
get Publication 3, Armed Forces' Tax Guide.
Other reasons spouse cannot sign.
If your spouse cannot sign the joint return for any other reason, you can sign for your spouse only if you are given a valid power of attorney (a
legal document giving you permission to act for your spouse). Attach the power of attorney (or a copy of it) to your tax return. You can use Form
2848, Power of Attorney and Declaration of Representative.
Nonresident alien or dual-status alien.
A joint return generally cannot be filed if either spouse is a nonresident alien at any time during the tax year. However, if one spouse was a
nonresident alien or dual-status alien who was married to a U.S. citizen or resident at the end of the year, the spouses can choose to file a joint
return. If you do file a joint return, you and your spouse are both treated as U.S. residents for the entire tax year. For information on this choice,
see chapter 1 of Publication 519.
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