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IRS Tax Penalties

The IRS charges penalties for non-compliance. In the case of non-payment of taxes and non-filing of a tax return, different kinds of penalties are charged. Even if you get an extension to file, you must pay your taxes before the deadline to avoid a failure to pay penalty.

Failure to pay penalty

If you do not pay your tax bill by the due date, you are charged a failure to pay penalty. In other words, you must pay your entire tax bill before April 15. If you pay a partial amount before the deadline, you will pay a penalty on the remaining balance.

If you pay estimated taxes, then you must cover more than 90% of your estimated tax bill to avoid the failure to pay penalty.

The failure to pay penalty still applies even after you have qualified for a tax debt payment plan, such as an Installment agreement. This penalty only goes away after you have paid your full tax debt or your entire tax debt is forgiven (see statute of limitation).

Failure to file penalty

If you do not file your tax return by the due date, you are charged a failure to file penalty of 5% each month your return is late.

You may be able to avoid the failure to file penalty if you can provide a reasonable cause for not getting your return in on time. A reasonable cause can be a personal tragedy such as theft, divorce, a natural disaster, or illness.