What Penalties Are There For Filing Late or Carrying Unpaid Debt?

On behalf of Brian Coggins of Coggins Law, P.C. posted in Tax Delinquency on Friday, December 24, 2015.

If you file your taxes late, or if you have tax debt that goes unpaid for a long time, then you will be subject to fines, penalties and interest payments. The IRS will implement these consequences — but how do they work? How much is someone penalized for filing late or having tax debt?

First of all, you can't be penalized for a filing where you are actually owed money. So, if the IRS is reviewing your past filings, you won't be penalized for a year where you are actually owed a refund by the IRS. However, when you do owe money to the IRS, then the agency will certainly come down hard on you.

If you failed to file a tax filing, the penalty is five percent per month it is late (even part of a month can count). This penalty will apply up to 25 percent. The percentage is out of the amount you owe the IRS, given what your (late) tax filing would indicate.

If you have tax debt that you haven't paid off, then the IRS will apply one half of one percent for every month that it is late. Here, again, the penalty tops out at 25 percent, and the percentage is out of how much you owe the IRS.

Of course, extenuating circumstances could be to blame for why you couldn't pay the IRS or send in a filing. If you were stricken with an illness, or if a family member died, or if your records were wiped out by some natural disaster, these circumstances certainly qualify as "extenuating." Tell the IRS about these things as soon as possible. Don't wait for them to act.

Source: FindLaw, "Penalties and Interest," Accessed Dec. 24, 2015