Did you know that the IRS has the right to add penalties onto the
taxes owed if you do not pay on time? This is something that many people
are unaware of. All in all, filing your taxes late can cost you a lot
of money if you do not have a refund coming to you. Fortunately, if you
are owed a refund there is no penalty associated with filing late since
you do not owe any additional money. It is important to be aware of IRS
late payment penalties this is usually enough to scare most people
into filing on time.
There are different levels of penalties that you need to be aware of. They include:
1. Interest. Did you know that interest is applied to every late tax
payment? These rates are set quarterly and change every three months.
Interest is added to the balance due every day you are not paid in full.
As you can imagine, this can really add up if you owe money for a long
period of time.
2. Failure to pay penalty. This penalty is applied when you file your
taxes but do not pay them in full. This is all too common among
taxpayers in todays day and age. The failure to pay penalty is
calculated as follows: 0.5 percent for each month you are not paid in
full, based on the amount owed. The maximum penalty for failing to pay
is 25 percent.
3. Failure to file penalty. This is a penalty that you pay if you do
not file and pay your taxes. It is calculated at 5 percent of your
balance due on a monthly basis. You will continue to pay this penalty
until you file your return. This penalty begins to apply to your account
from the deadline date for filing. The maximum failure to file penalty
is also 25 percent.
4. Combined penalties. If you have both unpaid taxes and have yet to
file, you can be hit with a combined penalty. This penalty is 5 percent
per month. When both penalties are charged the IRS reduces the failure
to file penalty by 0.5 percent to make an even 5 percent combined. The
maximum combined penalty is 47.5 percent of the original amount owed. As
you can see, this is a huge penalty that can greatly increase the
amount that you owe the IRS.
There are many penalties for paying taxes late. Along with this, you
may run into other penalties and interest along the way. As a taxpayer,
you will be able to avoid penalties year after year if you file on time
and pay any taxes that are due. It makes more sense to file and pay on
time than to get penalized by the IRS and end up owing as much as 47.5
Now that you know more about IRS late payment penalties you should
realize the importance of paying on time every year. There is no good
reason to want to pay the IRS more than you have to.