IRS Penalties for Late Filing and Payment of Federal Taxes in 2019

The penalties can get steep if you neither file nor pay

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The Internal Revenue Service charges penalties and interest for late payments, and it also imposes penalties for late filings. It can be a sinking feeling to finish preparing your tax return only to realize that you owe the IRS money, and worse, you might lack the funds to pay right away. It still makes sense to at least get your tax return in on time because you can avoid compounding the penalties. You may even be able to set up an installment payment plan with the IRS.

The Penalty for Late Payment

The late payment penalty applies to any portion of your federal tax debt that remains unpaid as of the due date, which is typically the tax filing date. The IRS imposes a failure-to-pay penalty of one half of one percent—0.5%—for each month or part of a month that the tax goes unpaid.

If there's any silver lining here at all, it's that the penalty can't exceed 25% of the total tax you owe.

The IRS might waive the late payment penalty if you can show that there's a reasonable and justifiable reason for the late payment. It can also waive the late filing penalty if you can establish that you didn't file your return on time for reasonable cause, such as because of illness or some other unforeseen calamity.

The Penalty for Late Filing

The penalty for filing late is steeper. As with the failure-to-pay penalty, it applies to any portion of your tax that remains unpaid as of the filing date, usually April 15 each year unless that date falls on a weekend or holiday. The penalty is 5% for each month or part of a month that your tax return is late, again with a maximum penalty of 25%. The clock starts at your tax deadline and the penalty accrues until you file your return.

​The longer you wait, the worse it gets. If you fail to file within 60 days of the due date or your extended due date if you filed for an extension, you'll pay at least $210 as of 2019, or a penalty equal to 100 percent of the tax you owe, whichever is less.

Interest Charges

Interest is typically added to any unpaid tax from the time the payment was due until the date the tax is paid. Interest rates are set by the IRS every three months at the federal short-term rate plus 3%. Interest is calculated for each day your balance is not paid in full, assessed on the unpaid amount of tax due as well as any late filing or late payment penalties. In other words, you'll have to pay interest on the penalties.

If You Don't File and You Don't Pay

Now the situation becomes particularly ugly. If you let April roll by and you don't request an extension from the IRS to file your return in October, and if you owe taxes on that return, the cap on the total associated penalties works out to 47.5% of the tax due—22.5% for late filing and 25% for late payment.

The failure-to-pay penalty will keep on growing up to 25% even after the failure-to-file penalty maxes out.

File for an Extension

​File a request for an extension of time to file immediately if you know you're going to be late finishing your tax return.

You might also file an extension even if you've completed your return, but it looks like you owe taxes. This at least pushes your filing deadline back to October and helps you avoid the more serious late filing penalty. Now you have time to take your return to a tax professional to make absolutely sure that you're not missing a deduction, a credit, or some other detail that could reduce what you owe.

​You might even dodge the late payment penalty if you pay at least 90 percent of what you think you owe and ​you file the extension before the April 15 due date. You must also pay the entire balance before the extended October due date.

This won't erase an interest you owe on the late amount after April 15, but at least you'll avoid the 0.5% late payment penalty, and you won't owe the late filing penalty.