Avoid Costly Federal Tax Penalties
There are numerous tax penalties in the tax code; however, these are probably the three worst:
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1. Unpaid Payroll taxes - often called the “100% penalty” – if you’re found to be responsible for unpaid federal payroll taxes that were withheld from employee paychecks, you may be personally liable for an amount equal to 100% of the unpaid tax liability. Generally this penalty applies to small business owners even if the business owner officially designates someone else to pay the taxes.
Mark your calendar for federal tax due dates.
2. Foreign Bank and Financial Accounts (FBAR) filings – you must file an FBAR with the Treasury Department’s Financial Crimes Enforcement Network (FinCen) if you had an interest in foreign financial accounts with an aggregate value exceeding $10,000 anytime during the prior year. This is designed to discourage taxpayers from hiding funds in offshore accounts. If the violation is deemed willful, you may be assessed a fine equal to the greater of $100,000 or 50% of the balance in the account for each violation. Greater penalties, including prison, apply if acts of fraud or false information are involved.
Deadline for 2015 is June 30, 2016.
3. Required Minimum Distributions (RMD) – generally you must begin taking distributions from qualified plans by April 1 the year following the year you turn 70½. The amount is based on IRS life expectancy tables and your account value on the last day of the previous year. The IRS can impose a penalty equal to 50% of the amount that should be withdrawn.
Make arrangements to take RMDs well before the end of the year.