I’ve always liked the acronym for the Alcohol and Tobacco Tax and Trade Bureau — simply TTB — because it cuts to the chase. It says “forget those fun words ‘alcohol’ and ‘tobacco’ that start off our name. We are a bureau focused on tax and trade, and that’s it. We are the government, and we are not here to party.”
So sure, the TTB might not be fun, and it makes rules and restrictions that you must abide by, but at least it tries to help from time to time. The TTB, being the humorless yet courteous pals they are, provided an overview of the most common types of penalties imposed for failures to file and/or pay taxes. This information is given to you to help reduce the likelihood of your incurring such liabilities. Since it sent along these notes in May, we assume it was sent as a hint-hint for a few of you. Take it away, TTB:
When you fail to timely file a required tax return, make timely tax payment or deposits, or willfully neglect to pay your taxes, the government may impose certain financial penalties against you. If you underpay your tax due to negligence or fraud, you may be subject to additional penalties. In certain cases, you may be subject to criminal prosecution.
Failure to file penalty
Under present law, if you fail to timely file your tax return you may have to pay a penalty equal to 5 percent of the tax not paid by the due date for each month or part of a month that the return is late. This penalty cannot be more than 25 percent of the tax. If you pay your taxes by electronic fund transfer, you are still responsible for the timely filing of your tax return.
Failure to pay penalty
If you do not timely pay your taxes, you may have to pay a penalty of 1/2 of 1 percent of your unpaid taxes for each month or part of a month after the due date that the tax is not paid. This penalty cannot be more than 25 percent of your unpaid tax. If a penalty for failure to file and a penalty for failure to pay both apply for the same month, the amount of the penalty for failure to file for that month is reduced by the amount of the penalty for failure to pay tax shown on a return.
Failure to deposit penalty
Regulations require certain taxes be paid using deposits or electronic fund transfer. The failure to deposit penalty is charged for failure to deposit correctly. Deposits must be made timely, and in the correct amount, and in the correct manner. Failure to comply may invoke the failure to deposit penalty. Deposits are timely if made on or before the deposit due date. The penalty rate ranges from 2 percent to 15 percent of the underpayment depending on the number of days a deposit is late.
Interest, compounded daily, is charged on any unpaid tax or penalty as prescribed by law. For more information on determining the rate of interest, as well as a table of interest rates, please see the most recent release about interest rates from the Internal Revenue Service.