Failure to File Penalty IRS Calculations

If there are no taxes due, there is no penalty.

The penalty is calculated based on a percentage of the taxes you didn’t pay on time.

Unpaid tax equals the total tax required to be shown on your return minus amounts paid through withholding, estimated tax payments and allowed refundable credits.

• The Failure to File Penalty is 5% of the Unpaid Taxes for each month or part of a month that the tax is late. The penalty will not exceed 25% of your Unpaid Taxes.
• If both Failure to File and Failure to Pay penalty are applied in the same month, the Failure to File 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 is late.
• If after 5 months you still haven’t paid, the Failure to File penalty will Max Out, but the Failure to Pay penalty continues until the tax is paid, up to its maximum of 25% of the Unpaid Tax as of the due date.
• If your return is over 60 days late, the minimum Failure to File penalty is $435 (for returns required in 2020, 2021 and 2022) or 100% of the tax required to be shown on the return, whichever is less.

Interest on a Penalty

The IRS charges interest on penalties.

Avoid penalties by filing and paying your tax by the due date. If you can’t do so, you can apply for an extension of time to file or a payment plan.

Apply for Extension of Time to File

If you need more time to prepare your return, you can apply for an extension of time to file. However, this does not grant you an extension of time to pay. A payment plan can help you pay over time.

Apply for a Payment Plan

If you can’t pay the full amount of your taxes or penalty on time, pay what you can now and apply for a Payment Plan. If you owe under $50k, a payment plan spread over 6 years is relatively easy to set up. You will reduce future penalties when you set up a payment plan and stick with it.

EAS can help you file your back taxes and arrange for a payment plan. Give us a call at (404) 719-0330 today, or contact us at TaxHelp@EASaccountingandtax.com.