Myth: "You MUST avoid failing to file taxes at the time required by law."
Answer: True. The willful failure to pay the estimated tax at the time required by law. The penalty: up to one year in prison and/or up to $25,000 in fines ($100,000 in the case of a corporation).
Here's an example: On September 28, 2006, David Weber, owner of Best Design, Inc., a screen printing operation, plead guilty of two counts of failure-to-file and was sentenced to one year in prison, one year of supervised release and ordered to pay $313,385 in taxes owed to the IRS. Between the years of 2001 and 2005, Weber failed to withhold federal income taxes for employees and failed to file his quarterly employment tax returns. He employed 18-22 people during this time, totaling a payroll of over $1.6 million. Although Weber had a payroll service that provided him with the 941 forms detailing the employee taxes to be paid, Weber failed to file the forms with the IRS.