Seven Things About Penalties
Taxpayers who do not file their return and pay their tax by the due date may have to pay a penalty. Here are seven things you should know about failure-to-file and failure-to-pay penalties.
The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.
The penalty for filing late is usually 5 percent of the unpaid taxes for each month of part of a month that a return is late. This penalty will not exceed 25 percent of the taxpayer’s unpaid taxes.
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.
You will not have to pay a failure-to-file penalty if you can show that you failed to file on time because of reasonable cause and not because of willful neglect.
You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid.
You will not have to pay a failure-to-file penalty if you can show that you failed to file on time because of reasonable cause and not because of willful neglect.
You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid.
If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty.
If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, 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% of the unpaid tax.
Seven Things You Should Know When Selling Your Home
People who sell their home may be able to exclude the gain from their income. Here are seven things every homeowner should know if they sold, or plan to sell their house.
Amount of exclusion. When you have gain from the sale of your home, you may be able to exclude up to $250,000 of the gain from your income. For most taxpayers filing a joint return, the exclusion amount is $500,000.
Ownership test. To claim the exclusion you must have owned the home for at least two years during the five year period ending on the date of the sale.
Use test. You also must have lived in the house and used it as your main home for at least two years during the five year period ending on the date of the sale.
When not to report. If you are able to exclude all of the gain from the sale of your home, you do not need to report the sale on your federal income tax return.
Reporting taxable gain. If you have gain which cannot be excluded, it is taxable and must be reported on your tax return using Schedule D.
Deducting a loss. You cannot deduct a loss from the sale of your home.
Rules for multiple homes. If you have more than one home, you may only exclude gain from the sale of your main home and must pay tax on the gain resulting from the sale of any other home. Your main home is generally the one you live in most of the time.
For more information see IRS Publication 523, Selling Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
Publication 523, Selling Your Home (PDF 194K)
Schedule D, Capital Gains and Losses (PDF 136K)
Tax Topic 701 — Sale of Your Home
Stacie's Tax Stuff 