How to Protect Yourself from IRS Late Penalties! My secrets revealed! You are going to want to read this...
I'm going to tell you my secrets, but first, I'd like to explain how the system works with respect to timeliness of filing tax returns and paying tax. If you file on time, but don't pay the tax due, you will be hit with a penalty of ½ of 1% of the tax owed each month. It keeps increasing until the tax is paid, or until the 25% maximum penalty is exhausted. The penalties plus the tax owed is called, "the assessed tax" and then interest accrues on top of that! Then, if you don't file on time, and don't pay, the punishment is even worse: you face a late filing penalty of 5% of the tax owed. Interest compounds daily on top of the penalties plus the tax owed This is how tax problems get so out of control.
So how does one protect themselves from these harsh IRS penalties? Well, I'm going to let you in on a couple of secrets. Number one: always file on time, even if you can't pay. Many people are scared to file when they owe more than expected and can't afford to pay, so they don't file at all. This is the worst thing you could do. Go ahead and file. The IRS will send you a bill. This way you won't face a bigger penalty for not filing, too.
Also, the IRS is notorious for losing tax returns, and occasionally losing other important documents, and even payments, so how do you prove you are not to blame? Secret number two: always mail everything that has a deadline certified mail, with a return receipt. The certified mail will be postmarked with the mail-out date showing that you met the deadline. The return receipt will provide proof that it got to its destination. This is the best possible way to ensure protection from government disorganization and from harsh IRS penalties.