Chapter 47 Filing Refund Claims, and
46.9 Tax Penalties for Late Filing and Late Payment
Late fi ling. If your return is fi led late without reasonable cause (illness, death in family, natural disaster, or other event beyond your control) and you owe tax, the IRS may impose a penalty of 5%
of the net tax due for each month the return is late, with a maximum penalty of 25%. However, the penalty is reduced for months the late payment penalty also applies; see the Note below.
If the return is more than 60 days late, there is a minimum penalty, equal to the smaller of $135 and 100% of the tax due. In one case, the IRS tried to impose the minimum penalty on a taxpayer who did not owe any tax because her withholdings exceeded her liability. However, the Tax Court held that the minimum penalty does not apply unless tax is underpaid. Th e IRS has agreed to fol- low the decision.
If failure to fi le is fraudulent, the monthly penalty is 15% of the net tax due, with a maximum penalty of 75%.
Note: For months that you are subject to the 0.5% monthly penalty for late payment (described below) as well as the penalty for late fi ling, the late fi ling penalty is reduced by the late payment penalty, from 5% to 4.5% per month. Th us, the combined penalty for each of the fi rst fi ve months is 5%(4.5% + 0.5%), with the late fi ling penalty reaching its maximum of 22.5% in fi ve months (4.5% x 5 = 22.5%). After fi ve months, the 0.5% monthly late payment penalty can continue until the tax is paid but not beyond the 50th month when the 25% limit is reached (0.5% x 50 = 25%) Late payments. If you are late in paying your taxes, a monthly penalty of 0.5% (ẵ of 1%) is imposed on the net amount of tax due and not paid by the due date. Th e maximum penalty is 25% of the tax due. Th e penalty is in addition to the regular interest charge. Th is penalty does not apply to the estimated tax (27.1). Th e late payment penalty does not apply if you can show that the failure to pay is due to reasonable cause and not to willful neglect.
A special reasonable cause rule applies if you obtain a fi ling extension. If by the original due date you paid at least 90% of your total tax liability through withholdings, estimated tax installments, or payment with your extension request, reasonable cause is presumed and the penalty does not apply for the period covered by the extension.
Unless reasonable cause is shown, the 0.5% monthly penalty also applies for failure to pay a tax defi ciency within 21 calendar days of the date of notice and demand for payment if the tax due is less than $100,000. If the tax is $100,000 or more, the penalty-free payment period is 10 business days.
Th e monthly penalty may be doubled to 1%, if, after repeated requests to pay and a notice of levy, you do not pay. Th e increased penalty applies starting in the month that begins after the earlier of the following IRS notices: (1) a notice that the IRS will levy upon your assets within 10 days unless payment is made or (2) a notice demanding immediate payment where the IRS believes col- lection of the tax is in jeopardy. If the tax is not paid after such a demand for immediate payment, the IRS may levy upon your assets without waiting 10 days.
46.9 • Tax Penalties for Late Filing and Late Payment
Table 46-1 Income Record Keeper
Type of income Records Needed Report on
Wages and salaries Form W-2. Your employer must send your 2015 Form W-2 by February 1, 2016. Attach Copy B to your federal return. Keep Copy C for your records. If you worked for more than one employer during 2015, attach all Copy B forms to your return.
Form 1040EZ, Line 1 Form 1040A, Line 7 Form 1040, Line 7
Tip income Form 4070 or other record showing your
monthly reports of cash tips of $20 or more.
Form W-2. Also see 26.7 for reporting FICA taxes on unreported tips.
Form 1040EZ, Line 1 Form 1040A, Line 7 Form 1040, Line 7
Interest income Form 1099-INT
Form 1099-OID
Deposit slips of interest received on money you loaned to others
Form 1040EZ, Line 2 ($1,500 or less) Form 1040A, Line 8(a); Schedule B, Part I (over $1,500)
Form 1040, Line 8(a); Schedule B, Part I (over $1,500)
Dividend income Form 1099-DIV
Company statements of dividend pay- ments, especially if stock dividends have been paid
Form 1040A, Line 9a for total ordinary divi- dends, Line 9b for qualifi ed dividends eli- gible for long-term capital gain treatment;
Schedule B, Part II (ordinary dividends over
$1,500)
Form 1040, Line 9a for total ordinary divi- dends, Line 9b for qualifi ed dividends eli- gible for long-term capital gain treatment;
Schedule B, Part II (ordinary dividends over
$1,500) Taxable refund of state and local
income tax Form 1099-G Form 1040, Line 10
Alimony received Record of alimony received and ex- spouse’s Social Security number Copy of divorce or separation decree or agreements
Form 1040, Line 11 if taxable
Business income or loss Business accounting records, deposit slips Business checkbook, deposit slips, invoice receipts, cancelled checks, bank statements Form 1099-MISC
Form 1040, Line 12; Schedule C or C-EZ;
Form 8582 if passive activity rules apply;
see Chapter 10 Sale of stocks and bonds Form 1099-B and broker confi rmation
statements Schedule D
Form 1040, Line 13 Sale of personal residence Form 1099-S.
Closing papers, records of purchase, im- provements; see 29.6.
If taxable gain is realized, Form 8949 and Schedule D
Sale of real estate Closing statement, records of cost and improvements
Records of depreciation
Form 4797 Form 8949 Schedule D Form 1040, Line 13
IRA distributions Form 1099-R Form 1040A, Line 11
Form 1040, Line 15 Pensions and annuities Form 1099-R if you receive annuity pay-
ments or lump-sum distributions Form 1040A, Line 12 Form 1040, Line 16
Commercial annuity income Form 1099-R Form 1040A, Line 12
Form 1040, Line 16
Tax Penalties for Late Filing and Late Payment • 46.9
Table 46-1 Income Record Keeper (continued)
Type of income Records Needed Report on
Rent income Account records, checkbook, cancelled
checks, and receipts Schedule E
Form 1040, Line 17
Form 8582 if passive activity rules apply
Royalty income Form 1099-MISC Schedule E
Form 1040, Line 17
Partnership income Schedule K-1, Form 1065 Schedule E
Form 1040, Line 17 Benefi ciary of trust or estate Schedule K-1, Form 1041 Schedule E
Form 1040, Line 17
S corporation Schedule K-1, Form 1120S Schedule E
Form 1040, Line 17
Unemployment compensation Form 1099-G Form 1040A, Line 13
Form 1040, Line 19
Social Security benefi ts Form SSA-1099 Form 1040A, Line 14
Form 1040, Line 20 Gambling income Form W-2G, diary or other record showing
wins and losses, losing tickets Form 1040, Line 21
Other income Form 1099-MISC, records of amounts
received, date received Form 1040, Line 21
“Kiddie” tax on income of a child Child’s Forms 1099-INT, 1099-DIV, and 1099-
OID Form 1040, Line 44
Form 8615 if income is reported on child’s return
Form 8814 if parent elects to report child’s income on Form 1040
46.9 • Tax Penalties for Late Filing and Late Payment
Table 46-2 Deduction Record Keeper
Type of deduction Records Needed Report on
Exemptions for dependents Records of support contribution for food, lodging, medical expenses, such as can- celled checks, diary entries.
Birth certifi cates in case age of a child is questioned. School attendance record if student status is questioned.
Form 8332 allowing noncustodial parent to claim the exemption. This form must also be attached to return by noncustodial parent claiming exemption; see 21.7.
Forms 2120 if dependent’s support is shared; see 21.6.
Form 1040A, Line 6(c) Form 1040, Line 6(c)
Educator expenses (assuming the
deduction is extended for 2015) Records of expenses/purchase and busi-
ness use Form 1040A, Line 16
Form 1040, Line 23 IRA deductible contribution Trustee’s statements of contribution, copy
of plan Form 1040A, Line 17
Form 1040, Line 32 Student loan interest deduction Bank statement showing interest paid Form 1040A, Line 18
Form 1040, Line 33 Tuition and fees deduction (assum-
ing the deduction is extended for 2015)
Student’s name and taxpayer identifi cation number,record of payments and state- ments of tuition and enrollment fees. For dependents, records of support contribu- tions.
Form 8917
Form 1040A, Line 19 Form 1040, Line 34
Health savings account deduction Trustee’s statements and Form 5498-SA,
showing contributions Form 1040, Line 25
Form 8889 Moving expenses Record of payments for expenses incurred,
diary or log Form 1040, Line 26
Form 3903 Deductible part of self-employ-
ment tax Schedule SE, Form 1040 Form 1040, Line 27
Self-employed health insurance
premium Record of payment, copy of contract,
insurance statement Form 1040, Line 29
Self-employed, SEP, SIMPLE, or qualifi ed retirement plan contribution for yourself
Proof of contribution, trustee statement,
copy of plan Form 1040, Line 28
Penalty on early withdrawal of
savings Form 1099-INT Form 1040, Line 30
Alimony deduction Canceled checks or other record of pay- ments, copy of divorce or separation decree, written separation agreement, ex- spouse’s Social Security number
Form 1040, Line 31
Domestic production activities
deduction Business records, Forms W-2 Form 1040, Line 35
Form 8903 Employee expenses Diary logs, receipts, copy of accounting to
employer Form 2106
Schedule A, Line 21 Home offi ce expenses Records of expenses, business use, and
allocation Form 8829 if self-employed; Schedule
C, Line 30
Form 2106 if an employee; Schedule A, Line 21
Medical and dental expenses Canceled checks or other record of payments,prescriptions; log of travel ex- penses and lodging costs
Form 1040
Schedule A, Lines 1–4
Tax Penalties for Late Filing and Late Payment • 46.9
Table 46-2 Deduction Record Keeper (continued)
Type of deduction Records Needed Report on
Taxes—state and local income, gen- eral sales (if deduction is extended to 2015), personal property, real estate
Form W-2 for withholding of income tax Canceled checks or other record of paid taxes
Credit card receipts showing sales tax Bank statements of property taxes paid by bank (mortgages)
Form 1099-DIV for foreign tax
Form 1099-INT or tax receipt for foreign tax withheld at source
Form 1040, Line 40 Schedule A, Lines 5–9
Mortgage interest Bank statement showing interest paid
Form 1098 Form 1040
Schedule A, Lines 10 and 11
Points Copy of bank statements, cancelled checks Form 1040
Schedule A, Lines 10 and 12 Qualifi ed mortgage insurance pre-
miums (if extended to 2015) Bank mortgage statements; cancelled
checks Form 1040; Schedule A, Line 13
Cash donations Canceled checks or other record of dona-
tions; receipts from charity Form 1040; Schedule A, Line 16 Volunteer expenses for charitable
organizations Log of travel, records showing out-of-pock-
et expenses on charity’s behalf Form 1040
Schedule A, Line 16 Property donation Description of property, records of fair
market value and cost. Receipt from organization.
A bank statement or written receipt from organization to substantiate all cash donations. Canceled check is not suffi cient.
If car is valued at over $500, a written acknowledgment showing gross proceeds if the organization sold the car.
If in excess of $5,000, qualifi ed appraisal report and statement from organization
Form 1040
Schedule A, Line 17 Form 8283
Casualty and theft losses See 18.8. For thefts, statements from wit- nesses, police records, or a newspaper account of the crime might help.
Form 1040
Schedule A, Line 20 Form 4684
Gambling losses Losing tickets or receipts, diary showing
daily wagers, wins, and losses Form 1040
Schedule A, Line 28
Union dues Wage statements showing withholding for
dues or cancelled checks Form 1040
Schedule A, Line 21 Unreimbursed travel and enter-
tainment expenses Diary log and receipts kept according to
the rules of 20.26 Form 2106
Form 1040; Schedule A, Line 21 Unreimbursed auto expenses if
you are employed Statement from employer requiring use of car
Mileage log
Receipts of expenses if actual costs are claimed Records of vehicle’s cost if depre- ciation is claimed
Form 2106 Form 1040
Schedule A, Line 21
Investment expenses Record of payments Form 1040; Schedule A, Line 23
Safe deposit box fee Bank statements Form 1040; Schedule A, Line 23
Tax preparation fees Record of payments Form 1040; Schedule A, Line 22
46.9 • Tax Penalties for Late Filing and Late Payment
Table 46-3 Tax Credit Record Keeper
Type of credit Records Needed Report on
Earned income credit Form W-2 if an employee, Schedule SE if
self-employed, to show earnings Form 1040 EZ, Line 8
Form 1040A, Line 42a; Schedule EIC Form 1040, Line 66a; Schedule EIC Child and dependent care
expenses Canceled checks or other record of pay-
ments for amounts paid to care for child Form 1040A, Line 31; Form 2441 Form 1040, Line 49; Form 2441 Credit for the elderly or the
disabled Physician’s statement of condition Form 1040A, Line 32; Schedule R
Form 1040, Line 54; Schedule R Child tax credit and additional
child tax credit Records of support contribution Birth certifi cates in case age of a child is questioned
School attendance record if student status is questioned
Form 1040A, Line 35 and Line 43 Form 1040, Line 52 and Line 67 Schedule 8812
Education credits Student’s name and taxpayer identifi cation number
Canceled checks or other record of pay- ments and statements of tuition and enroll- ment fees
For dependents, records for support con- tributions
Form 1040A, Line 33 and Line 44 Form 1040, Line 50 and Line 68 Form 8863
Residential energy credits (if ex-
tended for 2015) Certifi cation—if provided by
manufacturer—and proof of purchase Form 1040 Line 53; Form 5695 Foreign tax credit Form 1099-DIV; foreign tax returns or state-
ments Form 1116
Form 1040, Line 48 Nonrefundable credit for prior year
alternative minimum tax Copy of prior year’s Form 6251 Form 1040, Line 54 Form 8801 Credit for federal
taxes withheld Form 1099
Form W-2 Form W-4V
Form 1040EZ, Line 7 Form 1040A, Line 40 Form 1040, Line 64 Credit for estimated
tax payments Record of payments (online, canceled
checks, credit card, bank transfer) and copy of Form 1040-ES
Form 1040A, Line 41 Form 1040, Line 65 Saver’s credit Record of retirement plan contributions Form 1040A, Line 34
Form 1040, Line 51 Form 8880 Premium tax credit Form 1095-A (record from Marketplace
showing premiums and credit claimed on an advanced basis)
Form 1040A, Line 45 Form 1040, Line 69 Form 8962
Chapter 47
Filing Refund Claims, and Amended Returns
File a refund claim on Form 1040X if you want to take advantage of a retroactive change in the law, if you have overpaid your tax because you failed to take allowable deductions or credits, or overstated your income. You may use Form 1040X to cor- rect your return if you underreported your income or improperly claimed deductions.
File a refund claim on time. Th e time limits discussed in 47.2 must be strictly observed; otherwise, even if you fi le a valid refund claim, it will be denied because of late fi ling.
You do not have to fi le a refund claim if you have overpaid your tax due to excessive withholding of taxes on your wages or salary, or if you have overpaid your estimated tax.
You get a refund on these overpayments by fi ling your tax return and requesting a refund for these amounts. You must fi le your return within three years from the time the tax was paid to get the refund (47.2).
For a refund of an overpayment of FICA taxes, see 26.8 for how to claim a refund on your tax return. If you are not required to fi le a tax return, you fi le a refund claim on Form 843.
If you are entitled to a refund due to the earned income credit for certain low-income working families, you must fi le your tax return to get your refund, even though your income and fi ling status would not otherwise require that a return be fi led. See Chapter 25.
47.1 Filing An Amended Return 750
47.2 When To File a Refund Claim 750
47.3 Stating the Reasons for Refund Claim 751
47.4 Quick Refund Claims 751
47.5 Interest Paid on Refund Claims 751
47.6 Refunds Withheld To Cover Debts 752
47.7 Amended Returns Showing Additional Tax 752
47.8 Penalty for Filing Excessive Refund Claim 752