All of us are aware that April 15th, was the tax deadline for individuals that did not file an extension. If you are due a refund, there is no penalty for filing your tax return late. However, if you owe tax, and you did not file and pay on time, you will most likely owe interest and penalties on the tax that you pay late. In order to reduce the interest and penalties, you should file your tax return and pay the tax you owe as soon as possible. Below is additional information on these tax penalties:
  • Two penalties may apply. If you file your federal tax return late and owe tax with the return, two penalties may apply. The first is for late filing (failure-to-file penalty) and the second is for paying late (failure-to-pay penalty).
  • Penalty for late filing. The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.
  • Minimum late filing penalty. If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.
  • Penalty for late payment. The failure-to-pay late penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month that your taxes remain unpaid. It starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.
  • Combined penalty per month. If the failure-to-file penalty and the failure-to-pay penalty both apply in any month, the maximum amount charged for those two penalties that month is 5 percent.
  • File even if you are unable to pay. In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty. That being said, if you can’t pay in full, you should file your tax return and pay as much as you can. You can use the IRS Direct Pay to pay your tax directly from your checking or savings account. There are various options to help you pay your tax such as, getting a loan or paying by debit or credit card. The IRS will work with you to help you resolve your tax debt. An installment agreement with the IRS is also an option, using the Online Payment Agreement Tool at IRS.gov
  • Late payment penalty may not apply. If you requested an extension of time to file your tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15th due date.
  • No penalty if there is a reasonable cause. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time. There is also penalty relief available for repayment of excess advance payments of the premium tax credit for 2014.
If you have questions and/or concerns about any late penalties you may face, please feel free to contact our office at 607-272-5550 or info@swcllp.com! You can also visit the IRS.gov.