Taxpayers who are not able to pay their taxes by April 18 may still have options. The IRS urged taxpayers who missed the deadline to file as soon as possible.
Failure to File Penalty
Late tax filing is subject to a Failure to File Penalty. It applies to those who did file the tax return by
the due date. The penalty will be the percentage of taxes not paid on time. Marca noted that the best way to know the amount is that the IRS will send a notice or a letter that notifies how much
the penalty is, though calculating your own can also be done.
The IRS demonstrated how they calculate the Failure to File Penalty:
- The Failure to File Penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty won’t exceed 25% of your unpaid taxes.
- If both a Failure to File and a Failure to Pay Penalty are applied in the same month, the Failure to File Penalty is reduced by the amount of the Failure to Pay Penalty for that month, for a combined penalty of 5% for each month or part of a month that your return was late.
- If after 5 months you still haven’t paid, the Failure to File Penalty will max out, but the Failure to Pay Penalty continues until the tax is paid, up to its maximum of 25% of the unpaid tax as of the due date.
- If your return was over 60 days late, the minimum Failure to File Penalty is $435 (for tax returns required to be filed in 2020, 2021, and 2022) or 100% of the tax required to be shown on the return, whichever is less.
In addition, IRS charges interest on penalties. Depending on the type of penalty is the date from which charging interest begins. Until the full payment of the balance, the interest amount increases.
Missed the April 18 Deadline? File as soon as possible
The IRS urged those who are late tax filing to file and pay as soon as possible to reduce penalties and interest. The request for an extension to file gives until October 16, but it should be clear that it is not an extension to pay. It only provides an additional six months with a new filing deadline and interest will still apply to taxes owed after April 18.
Late tax filing and late payment might be a ‘big mistake’ because penalties add up quickly. Even if a taxpayer cannot immediately cover the full balance, a tax return should still be filed to reduce possible late-filing penalties. Penalty relief is provided to taxpayers who have filed and paid on time for the past three years and meet other requirements, including arranging to pay any tax due.
NBC Chicago reported that taxpayers filing returns in recent disaster areas have until October 16, 2023, including parts of California, Alabama, and Georgia. To file their tax returns and to know more, they can visit the IRS website.