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IRS Penalties for Filing or Paying Late

April 22, 2014

The April 15th filing deadline has passed, and if you are due a refund you can still file your return without penalty. On the other hand, if you owe a tax debt and you did not file or pay taxes before April 15th, then you will need to pay penalties and interest on the total taxes due to be paid.

Often, taxpayers get confused between failure to file and failure to pay penalties. Failure to file applies when you do not file your tax return by the deadline. The failure to pay penalty is assessed when you do not pay your taxes by the April 15th deadline. Interest is always charged on unpaid taxes after the filing deadline.

If you file your return late and also pay late, two penalties may apply. The first for failure to file and the second for failure to pay. Usually, the failure to file penalty is 10 times more than the failure to pay penalty.

The IRS charges penalties for failure to file and failure to pay thus:

  • Usually, the failure to file penalty is 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. This penalty will not exceed 25 percent of the unpaid taxes.
  • The failure to pay penalty is generally 0.5 percent of the unpaid taxes per month or a part of a month your taxes remain unpaid. Again, the maximum is 25 percent of the unpaid taxes.
  • If both the 5 percent failure to file penalty and the 0.5 percent failure to pay penalty are charged in a month, the maximum penalty charged for that month will be 5 percent.
  • If a return is filed 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 taxes.

If you filed for an extension to file and paid at least 90 percent of your tax bill, then you may not face a failure to pay penalty if you pay the rest of the balance by the extended due date. However, you will need to pay interest on the taxes you owe after the April 15th filing deadline.

If you could not file your return due to a reasonable cause, the IRS may reduce or forgive the penalty.

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