Late Filing Penalty

What is a late filing penalty?

A late filing penalty is an IRS charge for submitting your tax return after the deadline without a valid extension. The penalty is typically 5% of unpaid taxes for each month or partial month the return is late, up to 25%. If the return is over 60 days late, the minimum penalty is the lesser of $485 or 100% of unpaid taxes. The penalty applies even if you cannot pay what you owe.

Late filing vs late payment

Late filing penalties are much steeper than late payment penalties. If you cannot pay your full tax bill, file on time anyway and pay what you can. The late payment penalty is only 0.5% per month compared to 5% for late filing. You can request a payment plan for the balance. Filing on time limits your total penalty exposure even when cash is tight.

Penalty relief options

First-time penalty abatement may eliminate penalties if you have a clean compliance history for the past three years. Reasonable cause exceptions apply for circumstances beyond your control, like natural disasters or serious illness. Documentation helps your case. The IRS has streamlined procedures for certain situations. Contact them or work with your accountant to request relief before the penalty accrues further.