IRS TAX PROBLEMS – Penalties for Filing Late & Paying Late

IRS TAX PROBLEMS – Facts about Filing Late and Paying Penalties

April 18, 2017 was this year’s deadline for most people to file their 2016 federal tax return and pay any tax they owe. If taxpayers are due a refund, there is no penalty if they file a late tax return.

Taxpayers who owe tax, and failed to file and pay on time, will most likely owe interest and penalties on the tax they pay late. To keep interest and penalties to a minimum, taxpayers should file their tax return and pay any tax owed as soon as possible.

Here are some facts that you should know:

  1. Two penalties may apply. One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of penalties.
  2. Penalty for late filing. If taxpayers file their 2016 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if they owe less than $205, 100 percent (100%) of the unpaid tax. Otherwise, the penalty can be as much as 5 percent (5%) of their unpaid taxes each month up to a maximum of 25 percent (25%).
  3. Penalty for late payment. The penalty is generally 0.5 percent (0.5%) of taxpayers’ unpaid taxes per month. It can build up to as much as 25 percent (25%) of their unpaid taxes.
  4. Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent (5%) per month.
  5. Taxpayers should file even if they can’t pay. Filing and paying as soon as possible will keep interest and penalties to a minimum. IRS e-file and Free File programs are available for returns filed after the deadline. If a taxpayer can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS.
  6. Payment options. Taxpayers should explore their payment options at “IRS.gov/payments”. For individuals, “IRS Direct Pay” is a fast and free way to pay directly from a checking or savings account. The IRS will work with taxpayers to help them resolve their tax debt. Most people can set up a payment plan using the “IRS Online Payment Agreement tool” on “IRS.gov”.
  7. Late payment penalty may not apply. If taxpayers requested an extension of time to file their income tax return by the tax due date and paid at least 90 percent (90%) of the taxes they owe, they may not face a failure-to-pay penalty. However, they must pay the remaining balance by the extended due date. Taxpayers will owe interest on any taxes they pay after the April 18th due date.
  8. No penalty if reasonable cause.  Taxpayers will not have to pay a failure-to-file or failure-to-pay penalty if they can show “reasonable cause” for not filing or paying on time.