Will I have to pay any delinquency penalties when I file Form 1040X?

No late payment penalty will be due. If you owe tax, you can pay the tax with the Form 1040X and be billed for any interest. If the bill is not paid within 21 calendar days (10 business days if the amount equals or exceeds $100,000), a late payment penalty will be due from the date of the bill unless there is reasonable cause for the failure. If the original return was late, the amount due based on any additional tax on Form 1040X may be subject to the late filing penalty for the original return unless you have reasonable cause for the failure.

References:

• Instructions for Form 1040X and Form 1040X (PDF), Amended U.S. Individual Income Tax Return and Instructions
• Tax Topic 308, Amended returns

What kind of penalties and interest will I be charged for paying and filing my taxes late?

Interest, compounded daily, is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is the federal short-term rate plus 3 percent. That rate is determined every three months.

For current interest rates, go to News Releases and Fact Sheets and find the most recent Internal Revenue release entitled Quarterly Interest Rates.

In addition, if you filed on time but didn't pay on time, you'll generally have to pay a late payment penalty of one-half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid after the due date, not exceeding 25 percent. However, you will not have to pay the penalty if you can show reasonable cause for the failure. The one-half of one percent rate increases to one percent if the tax remains unpaid after several bills have been sent to you and the IRS issues a notice of intent to levy.

Beginning January 1, 2000, if you filed a timely return and are paying your tax pursuant to an installment agreement, the penalty is one-quarter of one percent for each month, or part of a month, that the installment agreement is in effect.

If you did not file on time and owe tax, you may owe an additional penalty for failure to file unless you can show reasonable cause. The combined penalty is 5 percent (4.5% late filing, 0.5% late payment) for each month, or part of a month, that your return was late, up to 25%. The late filing penalty applies to the net amount due, which is the tax shown on your return and any additional tax found to be due, as reduced by any credits for withholding and estimated tax and any timely payments made with the return. After five months, if you still have not paid, the 0.5% failure-to-pay penalty continues to run, up to 25%, until the tax is paid. Thus, the total penalty for failure to file and pay can be 47.5% (22.5% late filing, 25% late payment) of the tax owed. Also, if your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $100 or 100% of the tax required to be shown on the return.

Also, refer to Tax Topic 653, IRS Notices and Bills and Penalty and Interest Charges.

References:

• Tax Topic 653, IRS notices and bills and penalty and interest charges
• News Releases and Fact Sheets

If you don't owe any money, do you have to file a tax return? If you are late filing, without an extension, and have a refund coming back, how much are you penalized? How long can you make claim to that money?

Whether you have to file a tax return depends on your filing status, age, and gross income. For more information refer to Publication 501, Exemptions, Standard Deduction, and Filing Information. You are required to file even if you are going to get a refund. Even if you are not required to file, you need to file if you are due a refund from income tax withheld from your pay, or you qualify for the earned income credit or the additional child tax credit.

Late filing penalties are based on the amount owed. If you have a refund coming there will be no penalty.

While you can file the original tax return at any time, the amount of any refund cannot be more than any tax paid within the 3-year period (plus any extension of time for filing your return) immediately before you filed the claim. The time you file your claim may be based on the postmark date for this purpose. Income tax withheld from wages and estimated income tax payments (made before the due date without regard to extensions for the original return) are considered paid on the due date.

References:

• Publication 17, Your Federal Income Tax
• Publication 501, Exemptions, Standard Deduction, and Filing Information
• Publication 596, Earned Income Credit
• Tax Topic 301, When, where, and how to file
• Tax Topic 306, Penalty for underpayment of estimated tax

I'm expecting a refund, but I have not filed my return and the deadline has passed. Will a late penalty be charged?

If there is a refund due to you, no penalty for late filing will be charged. The penalty is based upon the unpaid taxes as of the due date of the return. There is a deadline for claiming a refund. While you may file the original tax return at any time, the amount of any refund cannot be more than any tax paid within the 3-year period (plus any extension of time for filing your return) immediately before you filed the claim (The time you file your claim may be based on the postmark date for this purpose). Income tax withheld from wages and estimated income tax payments (made before the due date without regard to extensions of the original return) are considered paid on the due date.

I've been told that payment of taxes can be deferred until August. I've also been told that payment is due April 15th and the extension is just for follow-up paperwork. Which is correct? Is it possible to file an extension for payment of taxes due?

If you are unable to file your individual tax return by the due date, you can get an automatic 4-month extension of time by filing Form 4868 (PDF), Application for Automatic Extension of Time to File for U.S. Individual Income Tax Returns, before the due date, usually April 15. By filing this form, you can avoid a late filing penalty. However, this extension does not give you more time to pay the tax you owe. It is only an extension of time to file your return. If you need an extension of time to file, you need to estimate how much tax, if any, you'll owe, and include that payment with your Form 4868. If you cannot pay the entire amount or a part of that amount, please see the information above.

If you are a U.S. citizen, resident or a member of the armed forces, whose home and main place of business or post of duty are outside the U.S. and Puerto Rico on the return due date, you are allowed a two-month extension until June 15, to file your return and pay any tax due. If you use this automatic extension, you must attach a statement to your return saying that your home and your main place of business or post of duty are outside the U.S. and Puerto Rico on the due date of your return. If you have a balance due on your return, it will be subject to interest from the due date (usually April 15) until you pay the tax.

References:

• Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
• Publication 17, Your Federal Income Tax

If I file for an extension, do I still have to send in any money I think I might owe by the April 15th date, or can I wait until I know exactly what I owe or don't owe and send it in by the extension due date?

If you need an extension of time to file, you need to estimate how much tax, if any, you'll owe on Form 4868 (PDF), Application for Automatic Extension of Time to File for U.S. Individual Income Tax Returns. You do not have to pay the amount of the estimate in order to obtain the extension. However, the extension does not give you more time to pay the tax you owe; it is only an extension of time to file your return. If you owe any amount of tax when you file your return, you will be charged interest on that unpaid balance from the original due date (usually April 15) of the return. You will also be charged a late payment penalty if the unpaid balance is more than 10 percent of your actual tax liability unless you have reasonable cause for the failure to pay.

References:

• Publication 17, Your Federal Income Tax

I filed an extension in April and still owe the IRS. I want to pay the money before the August deadline to file. Do I need to fill out a form to send in with my check? Where do I send the check? What are the penalties, interest due for not paying by April 15th?

Interest will be assessed from the due date of the return. When you file your return, simply pay the amount due. The IRS will send a notice of the interest due. You will also be charged a late payment penalty if the unpaid balance is more than 10 percent of your actual tax liability unless you have reasonable cause for the failure to pay.

References:

• Publication 17, Your Federal Income Tax

I received an IRS notice resulting from correspondence I sent regarding a change to my return. The notice includes additional penalties and interest charges. How are the penalties and interest figured?

Interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is determined every three months and is the federal short-term rate plus 3 percent. Interest is compounded daily. If you paid the net amount of tax that was due based on the tax shown on the return, and later determine that more tax should have been shown on the return, you will incur a failure to pay penalty. Additionally, when IRS bills you for any tax, penalty, or interest, if you do not pay the bill within 21 calendar days (10 business days if the amount equals or exceeds $100,000), a late payment penalty from the date of the bill unless you have reasonable cause for the failure.

If you file on time but don't pay the net amount due based on the tax shown on the return, you will generally have to pay a late payment penalty of one-half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid after the due date, up to 25 percent. However, you will not have to pay the penalty if you can show reasonable cause for the failure.

References:

• Publication 17, Your Federal Income Tax
• Publication 594 (PDF), Understanding the Collection Process
• Applicable Federal Rates
• Tax Topic 653, IRS notice and bills and penalty and interest charges

If we cash in a pension plan while in our thirties, when do we pay the taxes and penalties?

Because our tax system is a pay-as-you-go system, you may need to make an estimated tax payment by the due date for the quarter in which you received the distribution. When calculating your tax liability to determine whether you need to make an estimated tax payment, your total tax for the year should include the amount of the 10 percent additional tax on early distributions from qualified retirement plans unless any exception applies.

You would calculate the tax on Form 1040ES (PDF), Estimated Tax for Individuals, and any 10 percent additional tax on early distributions from qualified retirement plans on Form 5329 (PDF), Additional Taxes on Qualified Plans (including IRA's) and other tax-favored accounts.

References:

• Form 1040ES (PDF), Estimated Tax for Individuals
• Form 5329 (PDF), Additional Taxes Attributable on Qualified Plans (Including IRA's) and other tax-favored accounts
• Publication 505, Tax Withholding and Estimated Tax
• Tax Topic 451, Individual retirement arrangements (IRAs)
• Tax Topic 558, Tax on early distributions from retirement plans

Estimated quarterly income taxes for a corporation were not paid. What is the penalty amount? Is there any way to reduce the penalty?

If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. The penalty is figured separately for each installment due date. The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. This is true even if the corporation is due a refund when its return is filed.

Use Form 2220 (PDF), Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and, if so, the amount of the penalty.

If the corporation is charged a penalty, the amount of the penalty depends on the following three factors:

The amount of the underpayment.

The period during which the underpayment was due and unpaid.

An interest rate that is published quarterly by the IRS in the Internal Revenue Bulletin.

The penalty may be waived by IRS on a case-by-case basis if the failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance.

For more information, refer to Publication 542 , Corporations and the Instructions for Form 2220

References:

• Publication 542, Corporations
• Form 2220 (PDF), Underpayment of Estimated Tax by Corporations
• Instructions for Form 2220

What can I do to make sure I will not owe the IRS on my 2004 income tax return?

You can either increase the amount of income tax withheld from your pay or make estimated tax payments for 2004. You may change the amount of income tax withheld from your pay by filing a new Form W-4 (PDF), Employee's Withholding Allowance Certificate. Form 1040ES (PDF), Estimated Tax for Individuals, has a worksheet to see if you need to make estimated tax payments. For more details, refer to Tax Topic 355, Estimated Tax, or Publication 505, Tax Withholding and Estimated Tax.

References:

• Publication 505, Tax Withholding and Estimated Tax
• Form W-4 (PDF), Employee's Withholding Allowance Certificate
• Form 1040ES (PDF), Estimated Tax for Individuals
• Tax Topic 355, Estimated Tax

What is the minimum amount of estimated tax that I am required to pay without incurring any penalty or interest charges?

In general, you may owe a penalty for 2003 if the total of your withholding and estimated tax payments did not equal at least the smaller of:

90% of your 2003 tax (current year tax), or

100% of your 2002 tax (prior year tax). (Your 2002 tax return must cover a 12-month period.)

Your 2003 tax, for this purpose, is your Total tax for 2003. There are special rules for farmers and fishermen, and for certain higher income taxpayers.

Generally, you do not have to pay an underpayment penalty if either of the following conditions apply:

Your total tax is less than $1,000, (less withholding and credits) or

You had no tax liability last year.

Farmers and fishermen. If at least two-thirds of your gross income for 2002 or 2003 is from farming or fishing, you are required to make one installment equal to 66 2 /3% of your 2003 tax (current year tax).

Higher income taxpayers. If less than two-thirds of your gross income for 2003 or 2002 is from farming or fishing and your adjusted gross income (AGI) for 2002 was more than $150,000 ($75,000 if your filing status is married filing a separate return in 2002), substitute 110% for 100% in (2) above.

References:

• Publication 505, Tax Withholding and Estimated Tax

What is meant by "no tax liability" in the exceptions to the estimated tax penalty?

You do not have to pay estimated tax for 2003 if you meet all three of the following conditions.

1. You had no tax liability for 2002.

2. You were a U.S. citizen or resident for the whole year.

3. Your 2002 tax year covered a 12-month period.

You had no tax liability for 2002 if your total tax was zero or you did not have to file an income tax return.

Total tax for 2002. Your 2002 total tax on Form 1040 (PDF) is the amount on line 61 reduced by the total of the amounts on line 57, 64, and 66, any credit from Form 4136 (PDF) included on line 68, any recapture of a federal mortgage subsidy and any uncollected social security, Medicare, or railroad retirement tax included on line 61, and any tax on excess contributions to IRAs and medical savings accounts, and on excess accumulations in qualified retirement plans from Forms 5329 included on line 58.

On Form 1040A (PDF) , it is line 38 reduced by the amount on line 41 and 42. On Form 1040EZ (PDF) , it is line 10 reduced by line 8.

For additional information on this topic refer to Form 1040ES (PDF), Estimated Tax for Individuals , and Publication 505, Tax Withholding and Estimated Tax .

References:

• Form 1040ES (PDF), Estimated Tax for Individuals
• Publication 505, Tax Withholding and Estimated Tax

I was a student in 2002 and had no income. In 2003, I started working and did not have enough tax withheld. Will I owe a penalty because I did not make estimated tax payments?

You will not have to pay a penalty for 2003 if you did not owe tax for 2002. For additional information on the penalty for underpayment of estimated tax, refer to Tax Topic 306 , Penalty for Underpayment of Estimated Tax. For information on how to increase the amount of tax withheld by your employer, refer to Tax Topic 753, Form W-4 (PDF) , Employee's Withholding Allowance Certificate . For information on estimated tax requirements, refer to Tax Topic 355, Estimated Tax or Publication 505, Tax Withholding and Estimated Tax .

References:

• Publication 505, Tax Withholding and Estimated Tax
• Tax Topic 306, Penalty for underpayment of estimated tax
• Tax Topic 355, Estimated tax
• Tax Topic 753, Form W-4
• Form W-4 (PDF), Employee's Withholding Allowance Certificate

I was late mailing my estimated tax payment. To minimize the penalty, how do I compute the interest rate and late payment charges in order to send an additional check to the IRS as soon as possible?

The failure to pay estimated tax penalty is based upon the number of days that the payment is late and the current interest rate. Therefore, we cannot give a percentage that applies for all cases. To compute the amount of the estimated tax penalty you will need to refer to Publication 505, Tax Withholding and Estimated Tax and Form 2210 (PDF), Underpayment of Estimated Tax by Individuals, Estates and Trusts for directions on computing the penalty. Since the computations can get rather complicated, you may want to just send in the estimated tax payment and wait for a bill from us for the penalty.

References:

• Publication 505, Tax Withholding and Estimated Tax
• Form 2210 (PDF), Underpayment of Estimated Tax by Individuals, Estates and Trusts

Why should I owe a penalty for failing to pay estimated taxes when I received a refund for the prior year?

Since the estimated tax penalty is based upon your prior or current year income tax liability (not withholding or estimated tax payments), you may be subject to the penalty even if you had a refund for your prior year return.

References:

• Publication 505, Tax Withholding and Estimated Tax
• Form 2210 (PDF), Underpayment of Estimated Tax by Individuals, Estates and Trusts

If we cash in an IRA account while in our thirties, when do we pay the taxes and penalties?

Because our tax system is a pay-as-you-go system, you may need to make an estimated tax payment by the due date for the quarter in which you received the distribution. When calculating your tax liability to determine whether you need to make an estimated tax payment, your total tax for the year should include the amount of the additional 10 percent tax on early distributions from qualified retirement plans unless any exception applies.

You would calculate the tax on Form 1040ES (PDF), Estimated Tax for Individuals, and any 10 percent additional tax on early distributions from qualified retirement plans on Form 5329 (PDF), Additional Taxes On Qualified Plans (Including IRA's) and Other Tax-Favored Accounts. Any 10 percent additional tax would go on Form 1040ES line 12 "other taxes," when completing the worksheet.

References:

• Form 1040ES (PDF), Estimated Tax for Individuals
• Form 5329 (PDF), Additional Taxes On Qualified Plans (Including IRA's) and Other Tax-Favored Accounts
• Publication 505, Tax Withholding and Estimated Tax
• Tax Topic 451, Individual Retirement Arrangements (IRAs)
• Tax Topic 557, Tax on Early Distribution from Traditional and Roth IRA's.