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ExpressTaxExempt Blog

Thursday, November 10, 2016

Simple Ways to Prevent Hefty IRS Penalties

No matter how much we all loathe it, there’s just no way to recover late filing fees and penalties paid to the IRS. In most instances, the IRS evaluates penalties on a case-by-case basis if you can provide valid reasons.

The best way to prevent any late fees with the IRS is to file your exempt organization’s annual tax return on time. But not everything goes that smooth in life, and that’s understandable - so here are a couple of ways you can still avoid late filing penalties.

Automatic & Not-Automatic Extensions
Without a doubt, the most simple method of preventing substantial fees from the IRS is e-filing an Extension Form 8868. You can get up to six months of extra filing time by submitting both parts of the form:

  • Part I - Automatic 3-Month Extension
  • Part II - Additional, Not-Automatic 3-Month Extension

The IRS Form 8868 tax extension only extends your time to file - not the time to pay any owed taxes. You must remember to file your tax return by the extended due date, and you are still responsible for paying any estimated taxes by the original deadline.

Important: Form 8868 cannot extend the deadline for small tax-exempt groups filing IRS Form 990-N (e-Postcard).

Facts & Circumstances
If you missed the chance to e-file a tax extension, your only option is to submit IRS Form 990 or Form 990-EZ as soon as you possibly can. You’ll still get penalized each day your return is late; however, you can use a Schedule O to try to reduce or eliminate fees.

The IRS looks for what they call “facts and circumstances,” which are reasonable explanations about why your organization filed late. They specifically want valid answers to the following:

  • What caused the organization from requesting an extension of time
  • How the organization utilize conventional business care and prudence, and is not neglectful or careless
  • What steps the organization is taking to avert the same situation from happening again

Even though the process may take some time, providing these explanations could put you in a better position of leverage. In some cases, the IRS can completely waive penalties if delinquency was due to uncontrollable events - check with your local tax professional for more details.

While facts and circumstance can potentially save you, it’s still not as easy as filing an extension. With ExpressTaxExempt.com, you can complete and transmit your extension form, and get approved within minutes. And with our FREE downloadable ExpressTaxExempt - Form 8868 mobile app, you quickly and securely submit an extension on the go from your favorite iOS or Android device.

Our U.S. - based support team is available for any questions or assistance with e-filing - give us a call at 704.839.2321, Monday through Friday from 9 a.m. to 6 p.m. EST or send a message with support@ExpressTaxExempt.com.


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