IRS Late Filing and Payment Penalties, Interest Rates

Do you Owe or Not, that is the Question?

• If you owe taxes to the IRS/State, file your return or tax extension by April 15 or Tax Day EVEN IF YOU CAN'T PAY your taxes by tax day! This will avoid late filing penalties and interest which is important as late filing penalties apply only if you owe taxes and are generally much larger than late payment penalties! They do NOT apply if you don't owe taxes by tax day. e-File your return(s) or extension first and then pay as soon as you have the funds.
• Watch these important tax day deadline videos.

Extension or Tax Return?

• How to e-file a tax extension if you owe taxes but are not ready to file by Tax Day? An extension gives you 6 month more time to file a return - until October 15 - free from filing penalties, it does NOT give you more time to pay taxes penalty free. File something even if you can't pay antying by Tax Day!
• If you do not owe taxes or are owed a tax refund by Tax Day, there are no penalties for filing late and the IRS will owe you interest if they refund you late. whether you owe taxes or expect a refund, use eFile.com to get your taxes done and use direct debit payment or receive your refund via direct deposit. You have 3 years after the initial tax deadline to file and claim your tax refund, after that it would expire.

Estimate Your Tax Penalties

• Get actual dollar amounts based on your personal filing dates and tax payment amounts and dates. Use the eFile PENALTYucator and get real results. Calculate or estimate your tax penalties now.
• Learn how to pay for taxes after you have e-filed or how to set up a tax payment installment plan.
• Manage your tax return results via Form W-4 or tax withholding form.

The IRS charges under-payment interest - and pays out over-payment interest for payments made in excess of the amount owed - if you don't pay due taxes, penalties, tax additions, or interest by the due date. This applies even if you file an extension as the extension only temporarily extends the late filing penalty until the October 15 deadline. In order to avoid IRS penalties, balance your withholding with eFile.com. We offer four simple W-4 tools that help you fully create a W-4 to submit to your employer. When you balance your withholding, you can limit this so you are only owed a small refund and thus would not be subject to penalties if you filed late.

Additionally, if you have other income in addition to your W-2 income from employment, you can make estimated tax payments so you do not owe taxes when you file your return.

What are the IRS Penalty Interest Rates?

Penalties and interest begin building up once the regular due date has passed, regardless of if you file an extension. Interest is applied to taxes you owe or tax refunds you are owed. In addition to any due taxes, the penalties and interest apply to:

• Late filing penalty: the failure to file penalty, sometimes called the delinquency penalty, applies when you do not file on time and generally starts at 4.5% of the taxes owed; including the late payment penalty below, this is 5%. The penalty is applied each month the tax is unpaid and increases monthly, not to exceed 25%. If both penalties (failure to file and failure to pay on time) are applied in the same month, the late filing 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 the taxes have not been paid, the late filing penalty will max out. However, the failure to pay on time penalty continues until the taxes are paid, up to its maximum of 25% of the unpaid taxes as of the due date. If your return is over 60 days late, the minimum late filing penalty is $510 or 100% of the tax required to be shown on the return, whichever is less.
• Late payment penalty: the failure to pay penalty or underpayment of tax applies when you do not pay on time and generally starts at 0.5%, which is considerably lower than the late filing penalty. You may see only this penalty if you file an extension, but do not pay your due taxes with it.
• Accuracy-related: if a return was submitted with inaccurate information, the IRS may adjust your return which could result in taxes owed. The IRS may send you a CP14 or other notice explaining the adjustment; this includes a due date if you owe taxes. If unpaid, penalties and interest will begin to apply.
• You can avoid IRS interest if you pay the amount due by the "pay by" date.

What is Penalty Relief for Past-Due Taxes?

You may also be able to remove or reduce a penalty if you can prove a reasonable cause as to why you filed or paid late. These can be first offense (this is the first time you missed a filing/payment deadline and you meet other criteria), general reasonable cause (disaster or disturbance to person or property, family death, etc.), and statutory exception (you live in a federal declared disaster area, etc.). You may have relied on incorrect written advice from the IRS, mailed a return on time, but it arrived and been processed late, or other reasonable cause. Regardless of the reason, the IRS provides the option to plead your case if you miss the deadline and owe taxes.

When both penalties are owed, they will increase over 5 months to a maximum of 25% of the original balance due, including interest. If the return filed was over 60 days late, then the minimum failure to file penalty is $435 or 100% of the due taxes, whichever is less.

The IRS generally applies interest to any tax penalties applied, varying based on the type of penalty. In most cases of individual returns, the interest begins applying once the filing date has passed. To pay your IRS penalty, you would pay the IRS the same way that you would pay a tax balance.

If you received a notice that you owe taxes or you filed your return and owe tax:

Pay IRS taxes online | Set up an IRS payment plan

When the IRS sends you a letter regarding an adjustment to your refund or taxes owed, they generally provide information to contact them and dispute the change. You may be able to reduce or eliminate the interest by following through if you believe the IRS made a mistake. You may also be able to mail IRS Form 843 or Claim for Refund or Request for Abatement, in order to dispute interest or an IRS error. See how to contact the IRS.

Related: How to pay state taxes online.

IRS Interest Rates by Year and Quarter

In the table below, find IRS interest rates for individuals or noncorporate entities by quarter. The rates apply to both overpayments and underpayments, meaning if you owe taxes or if the IRS owes you a refund. Generally, the interest rates fluctuate from 3% - 8%. Estimate your potential tax penalties with the eFile PENALTYucator or IRS Penalty Calculator.

See more details on the current IRS interest rates, including interest rates as far back as 1975. This IRS release also has interest rates for corporations.

When the IRS Pays Interest

Did you know the IRS may owe you interest if they delay your tax refund beyond the normal timeframe? See details on IRS delays via "Where's My Refund?"

If you are owed a tax refund or you overpaid your taxes, the IRS states that they have 45 days to issue your refund before they begin owing you interest. If you file taxes and are owed a refund, regardless of if they are on time or late, the IRS begins this 45-day period on the day they receive it physically or electronically. Once the period has passed, the IRS will apply interest to your refund to be issued once they send the refund. When the payment is sent, the IRS stops accumulating interest.

See more updates on delayed refunds and how to track your IRS refund; you can also track your state tax refund here. When you are owed a tax refund, you do not have to worry about late filing penalties or interest, but you must file your return within three years of its due date. Otherwise, your refund will expire: don't surrender money that is rightfully yours!

Note: If your refund is subject to offset or garnishment, your interest and refund will be used to pay this before being issued to you.

To avoid penalties, balance your W-4, stay on track with this tax return timeline, and use tax software to e-file your returns online each year. eFile.com offers online preparation and e-filing for up to 60% less than TurboTax^® and H&R Block^®. Use eFile.com to file your returns online: start for free and the platform will up or downgrade you if you qualify for a free or cheaper return.

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