Collection Procedural Questions
Question: Will I be charged interest and penalties for filing and paying my taxes late?
Yes, when you do not file and pay your taxes on time, you will be charged interest on any unpaid balance, and you may also be subject to penalties, such as the failure-to-file and failure-to-pay penalties.
Interest charged on any unpaid tax compounds daily from the due date of the return (without regard to any extension of time to file) until the date of payment.
- The interest rate is the federal short-term rate plus 3%.
- The federal short-term rate is determined every three months.
- For current interest rates, visit the News Release and Fact Sheet Archive and look for the most recent Internal Revenue release about interest rates or search "quarterly interest rates" on IRS.gov; the relevant interest rate is the rate for underpayments.
If you did not pay your tax on time, you will generally have to pay a late-payment penalty, which is also called a failure-to-pay penalty.
- The late-payment penalty is 0.5% of the tax owed for each month or part of a month that the tax remains unpaid after the due date, up to 25%.
- You will not have to pay the penalty if you can show reasonable cause for the failure to pay on time.
- The 0.5% rate increases to 1% per month if the tax remains unpaid after several notices and 10 days after the IRS issues a final notice of intent to levy or seize property.
- If your return was filed timely and you are paying your tax via an installment agreement, the penalty is 0.25% for each month or part of a month that the installment agreement is in effect.
If you did not file on time and owe tax, you may owe an additional penalty for failure to file on time unless you can show reasonable cause for filing late.
- The combined penalty is 5% (4.5% late filing and 0.5% late payment) for each month or part of a month that your return was late, up to 25%.
- The late filing penalty applies to the net amount due, which is the tax shown on your return and any additional tax found to be due as reduced by any credits for withholding and estimated tax payments.
- If after five months you still have not paid, the failure-to-file penalty will max out, but the 0.5% failure-to-pay penalty continues until the tax is paid, up to 25%.
- The total penalty for failure to file and pay can be 47.5% (22.5% late filing and 25% late payment) of the tax owed.
- However, if your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $135 or 100% of the tax required to be shown on the return.
Note: If you feel a penalty or interest has been assessed in error, you may refer to Publication 1 (.pdf), Your Rights as a Taxpayer.
- Publication 594 (.pdf), Understanding the Collection Process
- Tax Topic 301 - When, How, and Where to File
- Tax Topic 653 - IRS Notices and Bills, Penalties, and Interest Charges
- Notice 746 (.pdf), Information About Your Notice, Penalty and Interest
Category: IRS Procedures
Subcategory: Collection Procedural Questions