IRS Penalties and Interest for Late Tax Payments  

There are very specific penalties and interest that the IRS charges for late or non-payments of income tax owed. The IRS also is very diligent about charging the penalties and interest and is usually timely in sending notices after the review of the tax return.

April 15th is the deadline for most people to file their individual income tax return and pay any tax owed. If you have not paid the tax in full and if there is any money owed, you will be sent a bill. Generally, interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is determined every three months and is the federal short–term rate (currently 7%) plus 3 percent. Interest is compounded daily.

If you file on time but don't pay all amounts due on time, you'll generally have to pay a late payment penalty of one–half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full or the 25% maximum penalty is applied. Further, the one–half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. For individuals, who file by the return due date, the one-half of one percent rate decreases to one-quarter percent for any month in which an installment agreement is in effect.

If you owe tax and don't file on time, the total late–filing penalty is usually four and one-half percent of the tax owed for each month, or part of a month, that your return is late up to five months. If your return is over 60 days late, the minimum penalty for late filing is the smaller of $100 or 100 percent of the tax owed.

You must file your return and pay your tax by the due date to avoid interest and penalty charges. For individuals, the due date is April 15 th of each year unless that date falls on a weekend. In that case, the due date is the first Monday after the 15 th.