Finance Base

The question is do you owe taxes to the Internal Revenue Services (IRS)? If you do, the IRS will calculate
compute penalties and interest on the amount you owed them. Penalties are calculated on the amount due.

There are three separate penalties:

1. Failure to file penalty

2. Failure to pay penalty

3. Interest

Each is calculated differently and of different rates also.

Not filing your return and paying your taxes by due date will earn you a penalty. If you understated your tax,
you may also have to pay a penalty. If you provide false information on your return, you may have to pay a
civil fraud penalty.

Late filing of your return by the due date which includes extensions, you need to pay a penalty based on the
tax not paid by the due date. This penalty usually has an interest of 5% per month but not more than 25%.

If your failure to file is due to false information, you will have a 15% penalty for each month up to a maximum
of 75%.

There are other reasons why a tax payer can incur penalties on taxes due them. There is a lesson to be
learned by looking at these penalties. If you owe IRS, it is better to file sooner rather than later. If you feel
like you are going to be a few months late on your next returns, file an extension. By doing so, you can
reduce if not totally eliminate the Failure to File Penalty.

Author recommends to check out more about 2010 tax and 2009 tax .
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