The Basics:
  • If you file on time, but don’t pay the entire balance you’ll be charged a late payment penalty of 0.5%, up to 25%, of the unpaid tax.
  • You may be penalized up to 47.5% of your unpaid tax if you don’t file your return on time and don’t file an extension.
  • If you request an installment payment plan for your taxes, and the IRS accepts it, you’ll be charged a fee plus interest on all unpaid taxes.  This fee is less if you set up direct debits for the monthly payments.

It’s best to file on time and pay as much of your balance due as possible. If you didn’t do this by the tax deadline, you probably fit into 1 of 3 categories.

1. You filed on time but didn’t pay all of your balance due.

You’ll generally have to pay a late-payment penalty of 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% of the tax due. The 0.5% rate increases to 1% if the tax remains unpaid after several notices have been sent to you, and the IRS issues a notice of intent to levy. The penalty will not be imposed if you can show reasonable cause for the failure to pay.

2. You haven’t filed or paid your balance due.

If you did not file on time, and you owe tax, you may owe a late-filing penalty in addition to the late-payment penalty unless you can show reasonable cause. The combined penalty is 5% (4.5% late filing, 0.5% late payment) for each month, or part of a month, that your return is late. The late-filing penalty is generally imposed for a maximum of 5 months. However, after 5 months, if you still have not paid, the 0.5% late-payment penalty continues to run, up to 25%, until the tax is paid. So, the combined maximum penalty may be as high as 47.5% [(4.5% x 5 months) + 25%]. Note: If your return is more than 60 days late, the minimum late-filing penalty is the smaller of $135 or 100% of the tax required to be shown on the return.

3. You’re paying taxes through an installment agreement.

If you requested an installment payment plan, and the IRS accepted your installment payment plan, they will charge you an administrative fee plus interest on the unpaid tax. If you filed a timely return and are paying your tax due according to an installment agreement, the late-payment penalty is 0.25% (instead of 0.5%) for each month, or part of a month, that the tax remains unpaid.

Regardless of which category you fall into, you’ll owe interest on any balance due from the due date of the return until the date of payment. The interest rate is adjusted every 3 months.

Still have questions about paying or filing your taxes late?