Resources
- Eight Facts on Late Filing and Late Payment Penalties
- IRS Q&A: Collection Procedural Questions
- Topic 653: IRS Notices and Bills, Penalties and Interest Charges
Why YOU Should Care
If you are late to file your return (or late to make a payment on the amount due) the IRS will impose penalties! Penalties start accruing the day after the filing due date.
Failure-to-File Penalty
The failure-to-file penalty is charged when you do not file a required tax return by the due date. This penalty is 5% of the unpaid taxes for each month that the return is late (up to 25% of the full unpaid amount). If your return is more than 60 days late, the minimum penalty is $135 or 100% of the taxes owed.
The failure-to-file penalty is greater than the failure-to-pay penalty, so you should always be sure to file your return even if you are unable to make a payment toward the amount due at that time. The IRS will work with you if you need to set up a payment plan.
Failure-to-Pay Penalty
The failure-to-pay penalty kicks in when you do not pay the entire amount of tax you owe by the due date. If you make a partial payment, the penalty will apply to the portion outstanding after the due date has passed. This penalty is .5% of the unpaid taxes for each month that the payment is late (up to 25% of the full unpaid amount). This rate can increase to 1% after the IRS has sent you several bills and issued a notice of intent to levy.
If both penalties are in effect at the same time, the maximum penalty you will be charged is 5% per month.
Filing an Extension
Filing an extension merely extends the time to file your return – NOT the time to pay. Your payment for your personal income tax is always due on April 15 of the year following the year in question.
“Reasonable Cause” for Late Returns
These penalties may be waived if you have reasonable cause for filing late. However, “reasonable causes” are typically situations that are quite extraordinary such as hospitalizations and natural disasters. Consult with your tax adviser to see if you qualify for an abatement.
