J.K. Lasser's Small Business Taxes 2022

APPENDIX BTax Penalties

1. Failure to File a Tax Return or Pay Tax
2. Failure to File Retirement Plan Returns and Notices
3. Failure to File Correct Information Returns
4. Failure to File Correct Payee Statements
5. Accuracy-Related Penalties
6. Preparer Penalties
7. Penalty Relief

Most taxpayers try to do the right thing, but needless to say, taxes are confusing and tax responsibilities can be overwhelming. As Wernher von Braun, the father of the U.S. space program, said “We can lick gravity, but sometimes the paperwork is overwhelming.” If you make mistakes, you don't file on time, or you don't file at all, you can be penalized. In addition, interest may accrue on the penalties as well as on any unpaid taxes.

In recent years, many of the penalty rules have changed. Amounts have increased, and new rules have been added. What's more, many penalties with dollar amounts can be adjusted annually for inflation. This appendix contains a roundup of common civil penalties. Criminal penalties are not discussed here.

Failure to File a Tax Return or Pay Tax

If you fail to file your return on time—by the due date or the extended due date if you obtain a filing extension—you will be subject to a late filing penalty. A penalty can apply in some cases even if you have deposited your taxes on time and owe no additional tax with your return.

The late filing penalty is usually 0.5% of the amount due for each month or part of a month that the return is late, up to a maximum of 25% of the tax due.

However, ...