Tax Penalties

If you don't file and or pay your taxes by the 4/15 deadline, you will incur penalties and have to pay interest on the unpaid balances. You may not be aware just how expensive that can be.

The failure to file penalty is higher than the failure to pay penalty. The penalty for failure to file is 5% per month or part of a month for each month that the return is late.(not to exceed 25% of the unpaid taxes. If you file more than 60 days after the due date(or the extended due date), then the penalty is smaller of $135 or 100% of the tax due.

You may be eligible to have the penalties abated, if you can provide that you have reasonable cause(in the eyes of the IRS) for filing your return late. Usually this is for traumatic or tragic events that prevented you from being able to file on time. You must submit a letter to the IRS requesting this abatement and explaining and substantiating why you did not file on time.

The failure to pay penalty is 1/2 of 1% for each month or part of a month that the taxes remain unpaid. If you have both failure to file an failure to pay penalties, then the failure to file penalty is reduced by the amount of the failure to pay penalty. The minimum penalty stated above, still applies.

If you have an extension and did not full pay your taxes by the due date, as long as you paid at least 90% of the total tax due, you will not have a failure to pay penalty.

If you need help with your taxes, contact an Enrolled Agent or other tax professional.