Penalties & Interest After the April 15 Deadline

As we approach the April deadline, it’s crucial for individual taxpayers to understand the potential penalties and interest that may accrue if taxes remain unpaid after the tax deadline. The IRS imposes three distinct penalties for failing to pay taxes and file tax returns by the April 15th deadline: the failure-to-file penalty, the failure-to-pay penalty, and interest charges.

Failure-to-File Penalty

The failure-to-file penalty applies when an individual owes taxes but fails to submit their tax return by the filing deadline. This penalty typically amounts to 5% of the unpaid tax for each month the return is overdue, with a maximum penalty cap of 25%. To avoid this penalty, taxpayers unable to meet the April 15th deadline must file a federal and state extension, if applicable, pushing their filing deadline to October 15th.

Failure-to-Pay Penalty

Should an individual file a return but fail to fully settle their tax dues by the filing deadline, they may incur the failure-to-pay penalty. This penalty equates to one-half of one percent of the unpaid tax amount for each month it remains outstanding, up to a maximum of 25%. The penalty continues until the full tax payment is made. Taxpayers can mitigate this penalty by arranging an installment agreement with the IRS, reducing the penalty to one-quarter of one percent for months under the agreement’s terms. However, failure to pay taxes even after receiving a notice of intent to levy property can lead to a one percent increase in the penalty on the outstanding tax amount.

Interest Charges

Additionally, interest accrues on the unpaid tax balance from the filing deadline until full payment is received. Interest rates can vary quarterly but typically align with the federal short-term rate plus three percent. This interest compounds daily, further emphasizing the importance of timely tax settlement. For up-to-date interest rates, taxpayers are encouraged to refer to the IRS website.

Understanding these penalties and interest charges is vital for taxpayers to avoid unnecessary financial strain and maintain compliance with tax regulations. By staying informed and promptly addressing their tax obligations, individuals can mitigate potential penalties and interest, ensuring a smoother tax-filing process.

If you have any questions, give us a call at 417-380-5000, or email us at transportation@abacus.cpa.