Get the facts about late filing and late-payment penalties

The annual deadline to file and pay your taxes is fast approaching. By law, the IRS may assess penalties for both failing to file a tax return and failing to pay taxes you owe by the deadline.

If you are unable to complete your tax return on time, you can get more time to file your return. In fact, you can request an automatic six-month extension online.

Here are seven important points about penalties for filing or paying late:

1. If you requested an extension to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a late payment penalty. However, you must pay any remaining balance by the extended due date. IRS Direct Pay is an electronic payment option that allows you to schedule payments online from your checking or savings account with no additional fee and with immediate payment confirmation. It’s secure, easy, and much quicker than mailing in a check or money order.

2. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options, such as getting a loan or making an installment agreement, to make payments. The IRS will work with you.

For example, you can apply for an Online Payment Agreement if you owe $50,000 or less in combined tax, penalties and interest, and filed all required returns. You may also qualify for a short-term agreement if your balance is under $100,000.

3. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.

4. If you do not pay your taxes by the tax deadline, normally you will face a late payment penalty of one-half of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month the tax is unpaid. It starts accruing the day after the tax-filing due date.

5. If both the 5 percent late filing penalty and the one-half percent late payment penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent.

6. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $205 or 100 percent of the unpaid tax.

7. You will not have to pay a late-filing or late-payment penalty if you show reasonable cause for not filing or paying on time.

Some people can get more time to file without having to ask for an extension. They include:

• U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file and pay any amount due without requesting an extension.
• Members of the military and others serving in Afghanistan or other combat zone localities generally can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3, Armed Forces’ Tax Guide.

For more information about penalty and interest charges, refer to Part One, Chapter 1, Filing Information, of Publication 17, Your Federal Income Tax for Individuals.

Additional IRS Resources:

• Online Payment Agreement tool
• Electronic Payment Options Home Page
• 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