Tax Tip: Filing Late And Filing An Extension

Failure to File Penalty

This penalty may apply if you missed the filing deadline (there are some exceptions). If so, you should send as much of the tax due as possible to lessen your penalty and subsequent interest. The penalty for filing late is 5% of the unpaid taxes per month or part of each month that the tax return is late. The maximum penalty is 25% of your unpaid taxes.

Interest Penalty

The interest penalty for failure to file on time is 1/2 of 1% of your unpaid taxes. This penalty starts the day after the filing deadline and continues for each month, or part of each month that you are late.

Filing Extension Safe Harbor

If you filed an on-time extension and paid at least 90% of the taxes you owe, you may not be subject to a failure to file penalty. However, if you file your return more than 60 days after the original due date or the extension due date, the minimum penalty is the lesser of $135 or 100% of the unpaid tax.

Exceptions For Not Filing

As mentioned, there are certain exceptions for not filing on time, but unfortunately, they are best summarized by the phrase, “reasonable cause.” In other words, if you can show the IRS that you did not file and the reason is deemed to be “reasonable,” you may be able to avoid the penalties.