By paying your taxes due and preparing your return with due diligence, you minimize the chances that interest and/or penalties will be asserted. Consulting with a tax preparer prior to filing your Form 1040X can provide you with information about correctly preparing your amended tax return.
Interest will be charged on taxes due that were not paid by their due date. Keep in mind that an Extension does not extend your time to pay taxes. Therefore, interest will be charged on taxes that are not paid by the due date even if you had an extension of time to file. Interest is also charged on any penalties imposed. The IRS will charge interest on the penalty from the due date of the return (including extensions).
Penalty for late payment of tax. If you owe additional tax due on your Form 1040X, Amended Tax Return, and do not pay within 21 calendar days from the date of notice and demand for payment (10 business days from that date if the amount of tax is $100,000 or more), a penalty will be assessed. The penalty for late payment of tax is usually ½ of 1% of the unpaid amount for each month or part of a month the tax is not paid. The penalty can be as much as 25% of the unpaid amount and applies to any unpaid tax on the return. If you can show reasonable cause for not paying your tax on time, you may not be held liable for the penalty.
Penalty for erroneous refund claim or credit. If you file a claim for refund or credit in excess of the amount allowable, you may have to pay a penalty for erroneous claim or credit. This penalty is equal to 20% of the disallowed amount. If you can show a reasonable basis for the way you treated an item, the penalty may not be assessed.
Penalty for frivolous return. In addition to any other penalties, the law imposes a penalty for frivolous return of $5,000. A tax return that does not contain information needed to figure the correct tax is a frivolous return. A frivolous return can also be a return that shows a substantially incorrect tax because you take a frivolous position or desire to delay or interfere with the tax laws.
Your tax preparer can provide you with more information regarding amendments to your income tax return. StrataTax, a San Diego consulting and tax services firm, is available year-round and will provide you with a free review of your previously filed tax returns. Our CPA and Former IRS Auditor is skilled at finding deductions and credits that other tax preparers and tax software miss. Call us at (858) 225-7720 to setup your free initial consultation or visit us at www.StrataTax.com for more information.
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