Need Some Deductions for 2011?

Don't overlook these!

10 Oddball Tax Deductions

Updated for 2011

Common IRS Penalties

The IRS assesses a number of penalties, with varying degrees of severity, depending on the type of violation.

Some of the more common types of penalties include:

1) Failure to file a timely return and late payment:

The IRS charges a 5% combined penalty of:
- 4½% for filing late and
- 1/2% for paying late.
  - 1/4% for months covered by an installment agreement.
The maximum failure to file penalty 22½%
- The 4½% rate can be assessed each month, or part of a month, up to a maximum of 5 months (5 x 4½%=22½%).
The maximum failure to pay penalty is 25%.
- The ½% rate can be assessed each month, or part of a month, up to a maximum of 50 months (50 x ½%=25%).
When late filing and late payment run concurrently (at the same time), the IRS assesses the combined rate of 5%:
- 4½% for late filing plus ½% for late payment.
The late filing penalty stops when it reaches 22½%.
The late payment penalty stops when it reaches to 25%.
If the return is more than 60 days late, the penalty will be either $100 or 100% of the tax due, whichever is smaller.

2) 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%.

3) Failure to supply a social security number where it is required:

4) Fraud:

Penalty: 75% applies to the portion of any tax underpayment due to fraud.
Intent, which is a state of mind wherein the person knows and desires the consequences of his act, is distinguished from:
- Inadvertence
- Reliance on incorrect professional advice
- Honest difference of opinion
- Negligence or carelessness

5) Filing a frivolous return:

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

6) Trust Fund Recovery Penalty:

Penalty: 100% of the tax due.
Trust fund taxes are employment taxes, including:
- Federal income taxes required to be withheld from an employee's pay, plus
- Social security and Medicare taxes required to be withheld from an employee's pay.
Nonpayment of trust fund taxes to the U.S. Treasury may result in the Trust Fund Recovery Penalty.

7) Dishonored Check:

Penalty: 2% of the check amount for checks of $750.
Penalty: Check amount or $15, whichever is less ,for checks of less than $750.

8) Underpayment of taxes:

Penalty: A 20% penalty may apply to the portion of an underpayment attributable to any of the following:
- 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.