All taxpayers who do not pay the full amount of their tax owed by April 15 will be assessed a failure-to-pay penalty. Those who owe tax and do not file, or postmark, their returns on or before April 15 also will be assessed a failure-to-file penalty. Fortunately, figuring the late penalty for filing taxes is fairly easy.

Failure-to-File Penalty

Keep in mind that failure-to-file penalty is substantially more than the failure-to-pay penalty. The failure-to-file penalty is currently 5 percent of the unpaid tax for each month the return is late. Also, the failure-to-file penalty was increased in 2009 for taxpayers who are more than 60 days late filing their tax returns. There is now a minimum penalty of $135 or 100 percent of the unpaid tax, whichever is less.

Failure-to-Pay Penalty

The failure-to-pay penalty is 0.5 percent of the unpaid tax for each month the tax remains unpaid. If you do not pay the full amount or make arrangements to pay, the Internal Revenue Service will send you a demand letter requesting full payment; if it receives no response, it will send an Intent to Levy notice. This will trigger an increase in the failure-to-pay penalty to a full 1 percent. If you receive an Intent to Levy notice, it is important to contact the IRS, because a levy is a seizure of a taxpayer's property or assets to pay back taxes.

Abatement of Penalties

Both the failure-to-file and the failure-to-pay penalty can be removed if you have what the IRS considers a reasonable cause for filing a late return or making your payment late. There are a variety of circumstances that would meet the reasonable cause criteria, including, but not limited to illness, incarceration, overseas travel and military deployment. To request an abatement of an IRS assessed penalty, complete IRS Form 843 and mail it to the IRS office which processes returns for your region. If you are not sure which IRS office processes returns for your region, log on to irs.gov for the full list.

Interest

In addition to the failure-to-file and failure-to-pay penalties, interest continues to accrue on all tax and assessed penalties until the amount is paid in full. The rate of interest fluctuates from quarter to quarter but is listed at irs.gov. Unlike penalties, interest cannot be removed.

Source:

Internal Revenue Service: Penalty for Failure to File Income Tax Increased

Internal Revenue Service: Penalty and Interest Charges

Internal Revenue Service: Avoiding Tax Penalties

More Information:

IRS Form 843 (PDF)