When managing your taxes, it’s a great help to know what is the penalty for filing taxes late. If you don’t, then you may have to do your research as missing those due dates can cause you to pay more than what you’re supposed to be paying. How to calculate IRS interest on unpaid taxes and more on this article.
What Is the Penalty for Filing Taxes Late? | A Guideline
1. Tax Filing Deadline
The Internal Revenue Services (IRS) charges penalties on two major occasions. First, when you failed to file a tax return and second, when you fail to pay what you owe. Other instances are when an individual fails to pay proper estimated taxes and in cases of dishonored checks. Generally, the tax return filing and payment is due every April 15th.
2. Tax Filing Penalty
Failure to file your tax return charges you 5% of any unpaid taxes. This penalty will be charged each month the tax return is late for a maximum of five months. The penalty starts to accrue at the filing due date and a final amount of penalty must not exceed up to 25% of the unpaid taxes.
3. Tax Payment Penalty
Failure to pay taxes on the filed tax return will incur penalties based on the following conditions:
- 0.5% of tax not paid by the due date
- 0.25% in cases of approved installment agreements, provided you filed the return on time and you are an individual
- 1% if the tax is not paid within 10 days upon receipt of notice of intent to levy
The penalties will continue to incur each month until the tax is fully paid or until it reaches the maximum rate of 25%. Failure to pay taxes unreported will incur the same penalties above. The recurring charges, however, will continue to incur until the tax is fully paid regardless if it reaches 25%.
4. Proper Estimated Tax Penalties
Employed and self-employed individuals use estimated taxes to pay income tax, self-employment tax, or alternative minimum taxes. Failure to pay estimated tax will incur penalties and is calculated based on the form 2210.
5. Dishonored Check Penalties
Paying with a check? Be careful as dishonored checks may also cause you to pay penalties. The IRS regulates that dishonored checks will incur a 2% penalty for taxes beyond $1,250. If the check amount is lower than $1,250, the penalty is set at $25 or the amount of the check, whichever is lesser.
6. Extension of Deadline
The IRS can be flexible in terms of the deadline when you are not able to file on the said due date. You just have to request an extension of time to file your tax return using the form 4868. Do note that this extension of time to file does not apply for an extension to pay your taxes.
7. Penalty Relief
You may qualify for an administrative relief from penalties incurred from failure to file a tax return or paying your taxes. But before you can qualify you must prove you have properly complied with the law requirements but are unable to meet tax obligations due to situations beyond your control. For more information about penalty relief, refer to IRS page.
Do you want to get rid of your tax penalties? Watch this video by eHow for more information:
It’s nearly the tax season again and paying for tax penalties may be the last thing you want. Make sure you file your returns and you pay your taxes on time to avoid paying extra money to the IRS.
Do you have any experience or are you familiar with what is the penalty for filing taxes late? Share your thoughts with us in the comments section below.