April 15 is the tax day deadline for most people. If you have a refund coming, there is no penalty if you file a late tax return. But if you owe taxes and you fail to file and pay on time, you’ll usually owe interest and penalties on the taxes you pay late. Here are ten facts that you should know about these penalties.
- If you file late and owe federal taxes, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.
- The failure-to-file penalty is usually much more than the failure-to-pay penalty, so if you can not pay what you owe by the due date, you should still file your tax return on time and pay as much as you can.
- You should try other options to pay, such as getting a loan or paying the IRS by credit card. There are additional fees to use credit cards to pay your taxes, but the fees are tax deductible and the tax is at least paid, stopping all penalties and interest from being assessed after the date of payment.
- The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan with the IRS using the Online Payment Agreement tool on IRS.gov.
- The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.
- If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.
- The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can also build up to as much as 25 percent of your unpaid taxes.
- If the 5 percent failure-to-file penalty and the 0.5 percent failure-to-pay penalty both apply in any month, the maximum penalty amount charged for that month is 5 percent.
- If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.
- You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time. This is done in response to a penalty notice issued to you by the IRS. Information on how to respond is usually supplied by the IRS together with the notice.
Additional resources available from the IRS on this topic:
- Electronic Payment Options Home Page
- Make a Payment – payment options
- Tax Topic 653 – IRS Notices and Bills, Penalties and Interest Charges
- Q&A about interest and penalties for filing and paying late
- Publication 594, The IRS Collection Process
DISCLAIMER: This information is extracted with permission from IRS regulations and publications. It is general in nature and the specifics of each taxpayer’s circumstances must be interpreted in determining the applicability of the penalty or exceptions thereto. In addition, these regulation interpretations may be subject to change from year to year depending upon new tax legislation, reform and litigation, as well as IRS changes in interpretation of new and existing laws and court rulings. We therefore are not responsible for the application of this general information to the specific circumstances of a reader unless we have been engaged as the reader’s tax return preparer or consultant.
Is it time to get help for your tax return? If so, you may make an appointment with one of our Directors of Audit and Tax Services by reference to the CONTACTS page above. Standard rates and terms for service will apply. New clients may be required to pay a retainer.
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