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What is the Penalty for Filing Taxes Late? Explained

A penalty is designed to encourage taxpayers to timely file their tax returns and ensure compliance with tax laws. If you owe taxes but don’t know how to process your returns, we’ve got you covered!
penalty
What is the Penalty for Filing Taxes Late? Explained
Penalties are calculated automatically by the IRS and added to any tax owed. The IRS will send you a notice detailing the amount of the penalty and the reason for it.
In this article

Failure to file taxes in the US can result in a variety of penalties imposed by the IRS. A penalty is designed to encourage taxpayers to timely file their tax returns and ensure compliance with tax laws. It serves as a deterrent for taxpayers who might otherwise neglect their tax obligations.

Penalty Rates

Failure-to-File penalty: This is the penalty for not filing or late filing. It affects those who don’t turn in their Form 1040 and other important tax documents on time. It is usually 5% of the tax owed for each month (or part of a month). The maximum is 25%. If your tax return results in a refund, then there are no penalties for failure to file.

Failure-to-Pay penalty: If you do not pay by the due date, you may be charged a failure-to-pay penalty. This is 0.5% of the tax owed for each month (or part of a month) that the payment is late, plus interest. The maximum failure-to-file penalty is 25% of the total tax.

The IRS calculates penalties automatically and adds them to any tax owed. The IRS will send you a notice detailing the amount and the reason for it. If you disagree with the penalty, file a protest with the IRS or seek the assistance of a tax professional.

How to Avoid a Failure-To-File Penalty

If you know you are going to miss the deadline, request an automatic six-month extension. Do this by mailing Form 4868 to the IRS. Remember though, a tax extension only gets you more time to file your return, not more time to pay. 

Some people, such as members of the military, overseas citizens, and natural disaster victims, may get an automatic extension. If you miss the tax extension deadline as well, the late-filing penalty could come back to haunt you.

You may also consider the penalty abatement option. This is the process of removing penalties for taxpayers who made a mistake in filing or faced unfavorable circumstances.

What if the IRS Owes You a Refund?

If you have to get a tax refund, the IRS won’t charge anything for late filing. To claim your refund, you must file your tax return within three years, or you could forfeit your refund.

In Conclusion

As penalties and interest on unpaid taxes are considerably high, it is better to not ignore your tax filing obligations. If you owe taxes but don’t know how to process your returns, consult a CPA or tax consultant. They can help you file your due returns, set up a reasonable payment plan and request abatement.

File your taxes with Beem. Estimate your Federal and State taxes with Beem’s Tax Calculator. Enjoy tax filing with our 100% accuracy and get the maximum refund. Get started now.

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Author

Picture of Nivedita Majumdar

Nivedita Majumdar

A journalist at heart, Nivedita is a passionate storyteller who thrives on informing readers about what matters to them. When not typing away on her keyboard, she is looking to savor new life experiences (on budget)!

Editor

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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