Last week President Obama signed the “Trade Facilitation and Enforcement Act of 2015,” a bill that includes an increase in the minimum penalty for failing to file income tax returns.

The increased penalty is effective for tax returns filed in calendar years after 2015, meaning it applies to the current tax season.

• The minimum penalty for failing to file tax returns when due has been increased to the lesser of $205 or 100% of tax owed for returns not filed when due. (Previously the penalty was the lesser of $135 or 100% of tax owed).
• The maximum penalty for failing to file tax returns when due remains the same, at 5% of additional tax owed for every month or part of a month that the return is late, with a maximum penalty of 25% of the amount owed.

The failure-to-file penalty should not be confused with the failure-to-pay penalty, which is incurred when tax owed is not paid by tax return due date.

The IRS indicates that taxpayers may avoid the failure-to-file penalty if they demonstrate “reasonable cause” for late filing.

If you have questions about meeting the April 18, 2016 tax return filing deadline, please contact your Whalen & Company representative.

Sources:

• “New Law Increases Penalty for Not Filing Income Taxes” – CPA Practice Advisor
•  Trade Facilitation and Enforcement Act of 2015 (most-recent version)

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• Tag: failure to file, late filing taxes, penalties for late taxes, what happens if i file my taxes late, what happens if you don't file taxes on time, what is tax deadline