Answer:

You may qualify for an offer in compromise (OIC) if you're unable to pay your taxes in full, or are facing economic hardship or other special circumstances. Refer to Tax Topic 204 - Offers in Compromise for more information.

The following details the application process and the items you need for consideration of your application:

  • Complete the application using Form 656, Offer in Compromise.
  • You must include the nonrefundable application fee listed in Form 656 with your offer. If you're requesting a low-income exception to the fee, complete Section 1 of Form 656. See Step 6 on page 5 of the Form 656-B, for more information on the required initial payment and application fee.
  • See Steps 2 and 3 on page 5 of the Form 656-B to determine if you must include either:
    • A completed Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, or
    • A completed Form 433-B (OIC), Collection Information Statement for Businesses.
  • Form 656 and referenced collection information statements are available in the Form 656-B, Offer in Compromise Booklet.

If your application is rejected and you're unable to pay your delinquent taxes in full now, you may be eligible for other payment options. Refer to Tax Topic 202 - Tax Payment Options for more information.

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Answer:

Yes, when you file your tax return late, you'll be charged interest on any unpaid balance and you may also be subject to failure-to-file and failure-to-pay penalties.

Interest accrues on the unpaid balance and compounds daily from the due date of the return (without regard to any extension of time to file) until you pay the balance in full.

  • The interest rate for taxpayers other than corporations is the federal short-term rate plus 3%.
  • The federal short-term rate is determined every three months.
  • For the current quarterly interest rate on underpayments, search "interest rates" in Newsroom Search or "quarter interest rates" on IRS.gov.

Failure-to-pay penalty is charged for failing to pay your tax by the due date.

  • The late payment penalty is 0.5% of the tax owed after the due date, for each month or part of a month the tax remains unpaid, up to 25%.
  • You won't have to pay the penalty if you can show reasonable cause for the failure to pay on time.
  • 10 days after the IRS issues a final notice of intent to levy or seize property, the 0.5% rate increases to 1% per month.
  • The penalty rate is 0.25% for each month or part of a month in which an installment agreement is in effect.

Failure-to-file penalty is charged on returns filed after the due date or extended due date, absent a reasonable cause for filing late.

  • The failure-to-file penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty won't exceed 25% of your unpaid taxes.
  • If both a failure-to-file and a failure-to-pay penalty are applicable in the same month, 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 is calculated based on the tax that remains unpaid after the due date. Unpaid tax is the total tax shown on your return reduced by amounts paid through withholding, estimated tax payments, and allowed refundable credits.
  • If after five months you still haven't paid, the failure-to-file penalty will max out, but the failure-to-pay penalty continues until the tax is paid, up to 25%.
  • The maximum total penalty for failure to file and pay is 47.5% (22.5% late filing and 25% late payment) of the tax.
  • If your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $210 (for tax returns required to be filed in 2019) 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 request abatement. Refer to Publication 1, Your Rights as a Taxpayer.

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