IRS Late Payment Penalty

Paying taxes late brings monetary penalties but the penalty isn’t the same for everyone. Mainly, two factors determine how much you’re going to pay in late payment penalties to the Internal Revenue Service. Your unpaid tax is what leads the calculation of the late payment penalty. The second is how late you are on your payments. These two factors determine how much you’ll owe in late payment penalties.

This article will go over everything you need to know about calculating the late payment penalty for the unpaid tax you owe to the Internal Revenue Service, how you can pay this tax, and cover further information.

Calculating the late payment penalty

As mentioned, you’ll use two figures to calculate the late payment penalty. One is the unpaid tax for the tax year and how many months it has been since taxes are due, including partial months.

The idea behind calculating the late payment penalty is simple. You take how much you owe in taxes and add 0.5 percent for each month or partial month it is late. From there, you can add the two and you’ll have your total payment including the penalty.

Since you’ll first need to calculate how much you owe, you can only figure out the accurate penalty amount after you prepare a federal income tax return. You can then calculate the penalty amount and enter it on Line 38 of Form 1040.

Maximum penalty amount

The penalty accumulates only for so long. For every 12-month period the tax owed is unpaid, you’ll pay a 6 percent penalty. The maximum penalty only goes up to 25 percent. Because of this, you won’t pay any further penalties if the tax is unpaid for 4 years and 2 months.

Now, failing to pay taxes won’t get you any criminal charges but your finances will be ruined severely. From financial institutions to banks to landlords to employers will see this as a red flag and you won’t be treated like others. So there are clearly more social problems that come with not having the means to pay your penalties than just the monetary penalties.

Regardless of how late you are on your payments, you can make tax payments through the IRS Direct Pay online or pay the IRS through money order or check order.

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