TOP DRAWER ARTICLE
Tax Penalties - Part II
by
HL Carpenter
Annual income tax returns, employment tax returns – your business is subject to many tax rules and requirements. Running afoul of them, either intentionally or by accident, means you may be exposed to tax penalties.
Here are five penalties and the related costs:
- Noncompliance – Failure to file information
returns, such as Form 1099 for payments to non-employees or Form W-2
for wages you pay to your workers.
Cost to you – Generally, $50 for each failure, not to exceed a total of $250,000. Penalties can be less if you correct the failure within certain time periods. Penalties are higher, with no limit, if you intentionally fail to file.
Exception – Except in cases of intentional failure to file, you may be able to get the penalty reduced if you can show reasonable cause.
- Noncompliance - Failure to comply with other information
reporting requirements, such as not including taxpayer identification
numbers on returns.
Cost to you - $50 for each failure, not to exceed a total of $100,000.
Exception - You may be able to get the penalty reduced if you can show reasonable cause.
- Noncompliance – Willful failure to file a tax
return.
Cost to you – Willful failure to file a return is generally a misdemeanor offense, which can mean a fine of up to $25,000 or one year in prison, or both. Civil penalties may also apply.
Exception – None.
- Noncompliance – Willful making and subscribing
to false or fraudulent return.
Cost to you – Signing a return that you know to be false is a felony with a fine of up to $100,000 for individuals ($500,000 for corporations) or three years in prison, or both.
Exception – None.
- Noncompliance – Willful attempt to evade or
defeat taxes. (Examples include keeping duplicate sets of books or covering
up sources of income.)
Cost to you – Tax evasion is a felony. Section 7201 of the Internal Revenue Code provides for fines of up to $500,000 for corporations. In addition, if convicted, you may be sentenced to up to five years in prison.
Exception – None.
Originally published November 2007.
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HL Carpenter, an experienced investor and a CPA, specializes in reader friendly financial and tax topics for individuals and small businesses, and publishes Top Drawer Ink, a newsletter that's chock full of humor and common sense information.
***
This information should not be considered legal, investment or tax advice. Top Drawer
Ink Corp. does not provide legal, investment or tax advice. Always
consult your legal, investment and/or tax advisor regarding your
personal situation. |
Last update: January 8, 2011
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