News‎ > ‎

Late Return Penalties

If you owe taxes, the IRS will calculate penalties and interest on the amount owed. If you are due for a refund, the IRS may pay you interest on the delayed refund.
If you have a refund, there will be no penalty for filing late. Since there is no amount due there will be no penalty.

There are three separate penalties that the IRS applies to the amount due:
1. Failure to file penalty: This penalty is calculated based on the time from the deadline of your tax return (including extensions) to the date you actually file the return. The penalty is 5% for each month the return is late, up to a total of 25%.

2. Failure to pay penalty: You will have to pay a failure-to-pay penalty of ½ of 1% (.50%) of your unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. This penalty does not apply during the automatic 6-month extension of time to file period if you paid at least 90% of your actual tax liability on or before the due date of your return and pay the balance when you file the return.
  The monthly rate of the failure-to-pay penalty is half the usual rate (.25% instead of .50%) if an installment agreement is in effect for that month. You must have filed your return by the due date (including extensions) to qualify for this reduced penalty.  If a notice of intent to levy is issued, the rate will increase to 1% at the start of the first month beginning at least 10 days after the day that the notice is issued. If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning after the day that the notice and demand is issued.  This penalty cannot be more than 25% of your unpaid tax. You will not have to pay the penalty if you can show that you had a good reason for not paying your tax on time.

-Combined penalties:   If both the failure-to-file penalty and the failure-to-pay penalty (discussed earlier) apply in any month, the 5% (or 15%) failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

3. Interest: It is calculated based on how much tax you owe. Interest rates change every quarter. Current interest rate for underpayment of taxes is 4%/year.
Comments