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PENALTIES FOR LATE FILING OF TAX RETURNS

 PENALTIES FOR LATE FILING OF TAX RETURNS

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 PENALTIES FOR LATE FILING OF TAX RETURNS

The IRS imposes penalties for late payment of tax, for late filing of a tax return, or both. The IRS also charges interest on any unpaid tax.

1. Penalty for Failure to Pay Tax by the Due Date

The late payment penalty applies to any portion of federal tax that is unpaid as of the payment due date. For each month or part of a month that the tax remains unpaid, the IRS imposes a failure-to-pay penalty of half of one percent (0.5%).

The late payment penalty cannot exceed 25% of the net amount of the tax due. The IRS may waive the penalty if the taxpayer can show there was a reasonable cause for the late payment. (Internal Revenue Code section 6651.)

 PENALTIES FOR LATE FILING OF TAX RETURNS

2.Penalty for Failure to File a Tax Return by the Due Date

The late filing penalty applies to any portion of tax that is unpaid as of the payment due date and the tax return is filed after the filing due date. The failure-to-file penalty is calculated based on the time from the deadline of your tax return (including extensions) to the date you actually file your tax return. The penalty is 5% for each month or part of a month that the tax return is late, up to a maximum penalty of 25%.

“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” (from Publication 17, Your Federal Income Tax, section on penalties).

The late filing penalty is based on the net amount of tax due as shown on the tax return.This penalty can be waived at the discretion of the IRS if taxpayer can show that the return was filed late due to a reasonable cause. (Internal Revenue Code section 6651.)

 PENALTIES FOR LATE FILING OF TAX RETURNS

3.Interest

Interest is typically added to any unpaid tax from the time that the payment of tax was due until the date the tax is paid. Interest rates are set by the IRS every three months. Currently, the IRS interest rate for underpayments of tax is 3% per year. The interest is calculated for each day your balance due is not paid in full. Interest is assessed on the unpaid amount of tax plus any late filing or late payment penalties. (Internal Revenue Code section 6601.)

IRS interest rates are variable and are set quarterly. For historical IRS interest rates,

 PENALTIES FOR LATE FILING OF TAX RETURNS

4. Here are eight important points about penalties for filing or paying late.

  1. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline.
  2. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should  explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you.
  3. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.
  4. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.
  5. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date.
  6. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent.
  7. 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 percent of the unpaid tax.
  8. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time.

 PENALTIES FOR LATE FILING OF TAX RETURNS

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PENALTIES FOR LATE FILING OF TAX RETURNS

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 PENALTIES FOR LATE FILING OF TAX RETURNS

 

 PENALTIES FOR LATE FILING OF TAX RETURNS

 PENALTIES FOR LATE FILING OF TAX RETURNS

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