Filing Taxes Late and Paying Penalties – Things You Need to Know
April 18 was this year’s deadline for filing your federal tax return and paying any tax you might have owed . When taxpayers are due a refund, there is no penalty for filing a late tax return.
However, If you owe tax, and failed to file and pay on time, chances are you will owe interest and penalties on the tax that was paid late. To keep interest and penalties to a minimum, always file your tax return and pay any tax owed as soon as possible.
Here are some facts about late filing and late payment that taxpayers should know:
- Late filing and late payment are two separate penalties – both may apply. If you are subject to both penalties, they can add up fast. Interest accrues on top of the penalties
- Penalty for late filing. If you file your 2016 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if you owe less than $205, 100% of the unpaid tax. Otherwise, the penalty can be as much as 5% of your unpaid taxes each month, up to a maximum of 25%.
- Penalty for late payment. The late payment penalty is generally 0.5% of taxpayers’ unpaid taxes per month. It can build up to as much as 25% of your unpaid taxes.
- Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5% per month.
- Taxpayers should always 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 you can’t pay in full, consider getting a loan or paying by debit or credit card – this may be less expensive than owing the IRS.
- Payment options. Several payment options for taxpayers are listed at IRS.gov/payments. For individuals, IRS Direct Pay Takes taxes directly from a checking or savings account. It’s fast and free. The IRS will work with you to help resolve your tax debt. Most people are eligible to set up a payment plan using the Online Payment Agreement tool on IRS.gov.
- When does the late payment penalty not apply? If you requested an extension of time to file your income tax by the tax due date and you paid at least 90% of the taxes you owe, you may not face a failure to pay penalty. However, you must pay any remaining balance by the extended due date. Keep in mind that you will still owe interest on any taxes paid after the due date.
- No penalty if reasonable cause. 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 on time, for example, in the event of a serious illness.
Taxpayers should always keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
Additional IRS Resources:
- IRS Direct Pay
- Make a Payment – payment options
- Tax Topic 653 – IRS Notices and Bills, Penalties and Interest Charges
- Q&A about interest and penalties for filing and paying late
- Publication 594, The IRS Collection Process
- Filing Your Taxes
- IRS Tax Map
Are you an expat or foreign national / US nonresident alien who needs with late payments or late penalties? Contact the professionals at Protax Consulting.