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How to avoid tax penalties if you can't afford your tax bill

In our prior post, we highlighted how most people would rather pay their taxes to Uncle Sam through their regular withholding with each paycheck and get a refund every spring rather than to have a larger paycheck and possibly owe the federal government money.

However, if you ever have the misfortune of owing at tax time, it is universally a good idea to avoid compounding your debt by owing penalties and interest.

As such, we will highlight three potential penalties awaiting for those who don’t pay their taxes in a timely manner and how you can avoid them. 

Non-filing penalty – If you fail to file your tax return by the April 15 filing deadline because you are poised to have a bill you can’t pay right away, there’s no reason to compound this misfortune. You are likely to avoid a non-filing penalty by just filing your return and negotiating a payment plan to help you get on track.

Non-payment penalty – If you file your return on time but don’t pay your bill in a timely manner, you could be subject to a separate penalty that is assessed at .5 percent of the total tax due each month. Like we alluded to above, setting a payment plan within your budget could stave off additional penalties.

Underpayment penalty – If you are a small business owner, who did not pay enough in quarterly taxes throughout the year, you could avoid an underpayment penalty by seeing if you qualify for a tax-filing safe harbor. An experienced tax law attorney can help in understanding which safe harbor would work for you.

The preceding is not legal advice. 

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Law Offices of Charles R. Frazier
5258 Murfreesboro Road #B
La Vergne, TN 37086

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