Per Diem Rates from the U.S. General Services Administration

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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").

IRS Tax Penalties

What's the difference between the Mafia's collection process and the IRS's? The Mafia doesn't send out written delinquency notices. But there is one thing they both have in common - the ability to instill fear!

The IRS assesses a variety of penalties as a result of noncompliance with tax rules. Some penalties are more severe than others.

Trust Fund Taxes

If you have employees, it is essential to prepare an accurate payroll, pay employees timely, and comply with reporting and payment requirements.

The IRS is particularly aggressive at enforcing the collection of Trust fund taxes. At 100% of the unpaid taxes, the Trust Fund Recovery Penalty is among the harshest of penalties.

Trust Fund Taxes Include:

Federal income taxes that should have been withheld
Social security taxes (the employee's share)
Medicare taxes (the employee's share)

Avoid the temptation to use trust fund taxes to pay other business expenses. If you fail to replenish those funds in time to turn them over to the government, you could get hit with a stiff penalty. The IRS views noncompliance with employment tax rules as a serious matter and aggressively enforces collection and assess stiff penalties!

Bankruptcy:

If an employer files bankruptcy in an attempt to escape paying trust fund taxes, it won't help; they're not dischargeable in bankruptcy.

In terms of who is actually liable for turning over trust fund taxes to the government, not only can the IRS hold business owner(s) liable for nonpayment, it can also hold other individuals in the business liable if such persons were responsible for ensuring the taxes would be turned over to the government.

Using a Payroll Service

Benefits of Using a Payroll Service:

Relatively inexpensive
Eliminates hours of tedious work and frees up time for more profitable activities
Ensures compliance with filing and deposit requirements
Avoids wasting precious cash on costly noncompliance penalties and interest!
Provides you with a record of all your payroll activity

There are generally two types of penalties in connection with filing a return:

Failure to File Penalty
Failure to Pay Penalty

Failure to File Penalty

The failure to file penalty is 5% of the unpaid taxes for each month or part of a month, up to 25%. The failure to pay penalty is 1/2 of 1% (.005) of the unpaid tax per month or part of a month, up to a maximum of 25%.

If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

Since the stiffer penalty is assessed for failing to file timely, you should at least file your tax return on time even if you can't afford to pay the tax due. If you can pay part of the tax, the failure to pay penalty will be lower.

How the IRS Calculates the Failure to Pay Penalty

The Failure to Pay Penalty is based on how long your overdue taxes remain unpaid. Unpaid tax is the total tax required to be shown on your return minus amounts paid through withholding, estimated tax payments and allowed refundable credits.

If you don't pay the tax you owe shown on your return, the IRS calculates the Failure to Pay Penalty as follows:

The Failure to Pay Penalty is 0.5% (.005) of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty won’t exceed 25% of your unpaid taxes.
If both a Failure to Pay and a Failure to File Penalty are applied in the same month, the Failure to File Penalty will be reduced by the amount of the Failure to Pay Penalty applied in that month.
- For example, instead of a 5% Failure to File Penalty for the month, the IRS would apply a 4.5% Failure to File Penalty and a 0.5% Failure to Pay Penalty.
If you filed your return on time as an individual and you have an approved payment plan, the Failure to Pay Penalty is reduced to 0.25% per month (or partial month) during your approved payment plan.
If you don’t pay your tax in 10 days after getting an intent to levy from the IRS, the Failure to Pay Penalty is 1% per month or partial month.
The IRS will apply full monthly charges, even if you pay your tax in full before the month ends.

Other IRS Tax Penalties

Underpayment of Estimated Taxes:

Interest is charged on an underpayment (deficiency). The rate is determined quarterly and equals the federal short-term rate plus 3%.

Failure to Supply a Social Security Number Where it is Required:

The penalty is $50 for each failure.

Fraud:

The fraud penalty is 75%, and applies to the portion of any tax underpayment due to fraud. Fraud is an intentional act, as distinguished from inadvertence, reliance on incorrect professional advice, honest difference of opinion, and negligence or carelessness.

Filing a Frivolous Return:

The penalty for filing a frivolous is $500. This could be a situation where the return filed is an apparent attempt to interfere with the administration of the federal income tax laws. For example, purposely not including enough information to figure the correct tax.

A penalty up to $10,000 could be assessed against a taxpayer who brings a frivolous court action.

Dishonored Check:

For a check of $750 or more, a 2% penalty may be charged. For a check less than $750, the penalty is the check amount or $15, whichever is less.

Underpayment of Taxes:

A 20% penalty may apply to the portion of an underpayment attributable to negligence or disregard of IRS rules and regulations. Negligence is failing to make a reasonable attempt to comply with the law.

The penalty for disregarding IRS rules or regulations may be avoided if you have a reasonable basis for your position. You must disclose your position on Form 8275 or Form 8275-R in the case of a good faith position contrary to a regulation.

Penalty Abatement Request

In order to avoid having to pay IRS Tax Penalties or to have them refunded back to you if you already paid them, you need to complete Form 843, Claim for Refund and Request for Abatement, and ask the IRS to remove the penalty.

Submit a Penalty Abatement Request if you can show reasonable cause for not paying the taxes, have demonstrated due diligence, and did not intentionally neglect to pay your taxes.

Reasonable Cause:

Reasonable cause may be asserted when a taxpayer exercises ordinary business care and prudence in determining his or her tax obligation, but is unable to comply with that obligation due to circumstance beyond his or her control. For example, an Administrative Waiver may be granted as a result of a formal government directive providing penalty relief because of a natural disaster or catastrophic event.