Penalties for Submitting Your Tax Return Late


We usually “rejoice” Tax Day on April 15, but it surely was pushed again to April 18 this yr for most individuals due to the Emancipation Day vacation in Washington, D.C. (the due date was April 19 for residents of Maine and Massachusetts due to the Patriot’s Day vacation in these states in the present day). In case you knew you were not going to have the ability to file your 2021 federal earnings tax return in time, you may have requested an extension to file your return till October 17 (however you continue to needed to pay the tax you anticipate to owe by your authentic due date).

However, after all, some folks missed the Tax Day deadline and did not request an extension. And, as you would possibly guess, the IRS does not take that evenly and can make you pay a value. In case you’re interested by what punishment the IRS goes to deliver down on you, here is a glimpse of the curiosity and penalties it’s possible you’ll face in the event you did not act earlier than the tax deadline.

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Curiosity

Curiosity accrues in your unpaid stability and compounds every day from April 18 till you pay the stability in full (from April 19 in the event you reside in Maine or Massachusetts). Rates of interest on underpayments of tax are set every quarter. For non-corporate taxpayers, the speed is the same as the federal short-term charge plus three share factors. The present rate of interest for underpayments is 4% (for second quarter of 2022).

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Late Cost Penalty

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In case you did not pay the tax you owe on time, the IRS will impose a late cost penalty equal to 0.5% of the tax owed after April 18 for every month, or a part of a month, the tax stays unpaid (after April 19 for individuals who reside in Maine and Massachusetts). The penalty is capped at 25% of the quantity owed. The speed jumps to 1% ten days after the IRS points a ultimate discover of intent to levy or seize property. Nevertheless, the penalty is simply 0.25% for every month, or a part of a month, wherein an IRS installment settlement is in impact.

You will not should pay the penalty in the event you can present “cheap trigger” for the failure to pay on time. Cheap trigger is predicated on all of the details and circumstances in your scenario. The IRS will contemplate any sound motive for failing to pay your taxes on time, together with:

  • Fireplace, casualty, pure catastrophe or different disturbances;
  • Incapability to acquire information;
  • Loss of life, severe sickness, incapacitation or unavoidable absence of you or a member of your instant household; or
  • Different motive that establishes that you simply used “all abnormal enterprise care and prudence” to fulfill your federal tax obligations however had been nonetheless unable to take action.

Merely not having the cash, in and of itself, is just not cheap trigger for the failure to pay taxes on time. Nevertheless, the explanations in your lack of funds could meet cheap trigger standards for the failure-to-pay penalty.

While you lastly pay, the IRS will first apply the cost to the tax you owe, then to any penalty, after which to any curiosity. A penalty quantity that seems in your invoice is mostly the overall quantity of the penalty as much as the date of the discover, not the penalty quantity charged every month.

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Failure-to-File Penalty

picture of a crumpled tax form

In case you did not file your return by Tax Day and did not request an extension, the IRS can impose a 5% failure-to-file penalty on any unpaid taxes for every month, or a part of a month, that your tax return is late. The penalty will not exceed 25% of your unpaid taxes, although.

The late submitting penalty is calculated primarily based on the tax that is still unpaid after April 18 or, if an extension is granted, after October 17. Unpaid tax is the overall tax proven in your return lowered by quantities paid by way of withholding, estimated tax funds, and allowed refundable credit.

In case your return is over 60 days late, the minimal failure-to-file penalty is the smaller of $435 (for tax returns required to be filed in 2022) or 100% of the tax required to be proven on the return.

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Double Penalties

picture of two hands each holding a golden dollar sign

In case you nonetheless have not paid what you owe 5 months after Tax Day, the failure-to-file penalty will max out, however the failure-to-pay penalty continues till the tax is paid, as much as 25%.

If each a failure-to-file and a failure-to-pay penalty apply in the identical month, the mixed penalty is 5% (4.5% late submitting and 0.5% late cost) for every month, or a part of a month, that your return was late, as much as 25%. The utmost whole penalty for failure to file and pay is 47.5% (22.5% late submitting and 25% late cost) of the tax.



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