Filing Income Tax How To Avoid Interest And Penalties - article about Filing Income Tax How To Avoid Interest And Penalties

Filing income tax returns — How to avoid interest and penalties

* If you can’t file your income tax on or before the April 17th 2007 deadline, the only way to avoid interest and penalties is to request an extension of the filing deadline. The IRS will grant a 4-month extension if you have a valid reason. Other than that, expect to pay interest on your tax liability if you file after the deadline. Interest will begin to accrue on April 18th of this year for late 2006 returns. Even if you file before the deadline, you will owe interest on any unpaid tax liability until you make payment in full. Filing income tax returns after the IRS deadline may also cause a penalty to be assessed, and penalties may also be assessed on unpaid tax even if you file before the deadline.

* As strange as it may seem, some taxpayers are fined for filing income tax returns that are determined to be frivolous by the IRS. Don’t try to be funny when filing income tax returns—the joke will always be on you, sometimes to the tune of several hundred dollars.

* If the IRS determines that fraud has been committed in filing income tax returns, they have every right to seek the highest penalty permitted by law.

The criteria for determining penalties can be extremely complicated. You will need to request a full explanation from the IRS or from your tax advisor.

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