The IRS is entitled to assess a penalty if you fail to file a tax return, fail to pay taxes due, or both. You can get an extension of time to file a tax return but this extension applies only to the filing of the return, not the payment of taxes due. Taxes must still be paid by the deadline to file your tax return.
Failure to file:
Failure to pay:
- The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
- If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
THINGS TO NOTE:
The IRS can assess interest as well on any unpaid tax from the time that the payment of tax was due until the date the tax is paid. Interest rates are set by the IRS every three months.
If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.
If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty.
However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.
Since the penalties are calculated based on the amount of taxes due, if you do not owe any taxes, there will be no penalty.