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Posted by Phil Marti on May 8, 2008, 6:03 pm
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"Harlan Lunsford" wrote:
> On another board we've discussed a situation in which form 4868 is filed
> without any additional tax being paid. There were posts from tax pros who
> stated that clients had not been billed the 5% per month FTF penalty
> even though their balance due was substantial. only the other penalty,
> 0.5% and of course interest were charged.
>
> But no one could opine or offer evidence as to just when IRS policy
> changed or why.
I'm working strictly from fading memory here, but as for the when, I think
it was back when Fred "I never met a delinquent taxpayer I didn't like"
Goldberg was Commissioner or Asst. Secretary for Tax Policy, which would put
it during the Bush I administration. I distinctly remember throwing a
perfect fit when IRS gave up even the pretense of making the taxpayer come
up with a reasonable estimate and pay the balance due with the 4868.
As for the why, it was Goldberg who espoused the theory that people don't
comply only if they don't understand or IRS makes it too hard, and IRS
executives didn't get to be IRS executives by dissin' the boss. Compliance
never has recovered.
Policy statements were declassified in the 1970's, so someone with too much
time on his hands could probably dig up more specifics.
--
Phil Marti
Clarksburg, MD
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Posted by Taxmanhog on May 8, 2008, 6:11 pm
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> Policy statements were declassified in the 1970's, so someone with too
> much time on his hands could probably dig up more specifics.
http://www.irs.gov/irm/part1/index.html
See major section 1.2 Servicewide Policies and Authorities
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<< that may be imposed upon the taxpayer. >>
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Posted by Paultry on May 8, 2008, 9:32 pm
Please log in for more thread options Harlan Lunsford wrote:
> (snipped....
>
> On another board we've discussed a situation in which form 4868 is filed
> without any additional tax being paid. There were posts from tax pros
> who stated that clients had not been billed the 5% per month FTF penalty
> even though their balance due was substantial. only the other penalty,
> 0.5% and of course interest were charged.
>
> But no one could opine or offer evidence as to just when IRS policy
> changed or why.
>
> Can anyone here say?
>
> ChEAr$,
> Harlan
>
An extension filed without payment can be voided, but not
arbitrarily. Many years ago (early 90s?), I secured a 1040
on October 15. The (then) 4 month automatic extension and
the 2 month additional extension both showed zero tax due.
The return showed $50,000 tax due (and not paid with
return.) The taxpayer and his preparer both admitted to
knowledge of a sizable tax liability when the extensions
were filed. I considered the extensions to be invalid and
ignored them. My prompt assessment included the 25% failure
to file penalty. The taxpayer's attorney argued that only
the Examination Division had the authority to invalidate an
extension and then assess the FF penalty. Subsequent
research determined him to be correct. In this case, the
penalty was abated (and later reassessed via the proper
Examination process.)
I can't recall the regs, rules, or manual sections relevant
to this, but the policy has been in place for a long time.
As far as I know, there is no systemic review process to
invalidate an extension. In my experience, absent human
intervention, the extension will stand with or without
adequate estimation and payment of tax due.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by Condor on May 8, 2008, 10:34 am
Please log in for more thread options > If you file form 4868 and are unable to pay the tax due, the penalty
> is 0.5% a month. If you file your taxes and are unable to pay the tax
> due, what is the penalty? Is it 5% a month (till a maximum of 25%),
> or is it 0.5% a month till October 15, then 5% after that?
There are penalties for Failure to File (FTF) and Failure to Pay (FTP).
If you file your balance due return after the regular or extended due date,
you will be assessed a FTF penalty computed at 5% per month or part of a
month up to a maximum of 25%. However, whenever the FTF and the FTP run
concurrently, both penalties are assessed at a combined rate of 5% per
month, effectively making the FTF penalty alone 4.5% per month, or a maximum
of 22.5% (4.5% X 5 months).
For example: If you extended the due date of your 2007 return until October
15, 2008, but did not file the return until December 1, 2008, and you owed
$1,000, you would be liable for 2 months of FTF penalty at 4.5% per month
($1,000 X 2 X .045 = $90 FTF). You would be liable for 8 months of FTP
at 0.5% per month ($1,000 X 8 X .005 = $40 FTP).
You also are liable for interest in addition to the two penalties.
> Is there a way to file your taxes and still get the 0.5% penalty a
> month?
As long as you file your return by the regular or extended due date, you
will not be liable for the FTF penalty.
If you change the facts in the example above to have you file the return by
the extended due date of October 15, you only will be liable for the FTP
penalty (and of course interest).
Condor
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Condor on May 8, 2008, 10:34 am
Please log in for more thread options > you would be liable for 2 months of FTF penalty at 4.5%
> per month ($1,000 X 2 X .045 = $90 FTF)
The tax law imposes a $100 minimum FTF, or 100% of the tax due if it is less
than $100. Thus I believe the actual FTF in this scenario would be $100.
Condor
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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