What you need to know about Late Filing and Late Paying Penalties

April 15 was the last day to file tax return for most people. If you are due a refund there is no penalty even if you file a late tax return. But if you have a balance to pay, and you failed to file and pay on time, you will usually owe interest and penalties on the tax you pay late. You should file your tax return and pay your balance as soon as possible to stop them.   Below are eight facts that you should know about these penalties.


1.    Two penalties may apply if you file late.  If you file your federal tax return after April 15 and you owe tax with the return, two penalties may apply. The first is a failure-to-file on time penalty for late filing. The second is a failure-to-pay penalty for paying late.

2.    Penalty for late filing of your tax return.  The failure-to-file penalty is normally 5% of the unpaid taxes for each month or part of the month that a tax return is late, but it will not exceed 25% of your unpaid taxes.

3.    Minimum late filing penalty.  If you file your tax return 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% of the unpaid tax.

4.    Penalty for late payment of your tax due.  The failure-to-pay penalty is generally 0.5% per month of your unpaid taxes. It applies for each month or part of the month when your taxes remain unpaid.  It starts accruing the day after taxes are due. It can build up to as much as 25% of your unpaid taxes.

5.    Total combined penalty per month.  If the failure-to-file penalty and the failure-to-pay penalty both apply in any month, the maximum amount charged for these two penalties on that month is 5%.

6.    Even if you can’t pay, you should file your return.  In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty. So if you can’t pay the balance in full, you should always file your tax return on time and pay as much as you can.  You can use IRS Direct Pay to pay your tax due directly from your checking or savings account. You can also try other options to pay, such as getting a loan or paying by debit or credit card.  Most people can set up an installment agreement  by using the Online Payment Agreement tool on IRS.gov.

7.    Sometimes late payment penalty may not apply.  If you requested an extension of time to file your income tax return by the tax due date and paid at least 90% of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay off all of the remaining balance by the extended due date.  However, you will still owe interest on any taxes you pay after the April 15 due date.

8.    No penalty if reasonable cause.  In some cases, you will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying your tax owe on time

If you have any questions, please feel free to email us.

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Source:  www.irs.gov.
Email:   Excellent-tax@gmx.com