Question:

Is there a penalty for paying taxes late?

Late Tax Penalty

There are a couple of penalties that fall under the ‘late tax' category. One involves your tax return filing, the other involves paying your taxes.

Filing. The most common occurrences for the IRS to assess a penalty is for failure to file a tax return by the due date (on time). This IRS penalty is known as the ‘failure to file' penalty. Whenever you fail to file your tax return by the due date (usually April 15), the IRS may penalize you. It is usually 5% of your unpaid tax bill.

In addition, if you file your return later than 60 days after the due date (or an extended due date, as in the case of an extension), there is a minimum penalty of $100 or 100% of your unpaid tax bill. You will not be assessed this penalty, however, if you can show the IRS that you did not file on time due to a reasonable cause. A reasonable cause means that you failed to file your tax return on time for a reason other than willful neglect. For instance, you were hospitalized.

Payment. The other late tax penalty involves paying your taxes after the due date. Here, the IRS will penalize you anywhere from ½ to 1% of your unpaid tax amount. The amount accumulates with each month, or partial month that your taxes remain unpaid.

By showing the IRS that there was a good reason for you not paying your taxes on time (such as hospitalization, losing a job, etc.), you will not be assessed this IRS penalty.

If you filed for an extension and you paid at least 90% of your taxes due with the extension application, you will not be charged a late paying penalty. There are other requirements regarding extensions that must be met, also.

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