Will I be charged interest and penalties for paying and filing my taxes late?

YES! Interest is charged on the unpaid taxes from the due date of the tax return until the date of payment. Interest rates are computed from the Federal short-term rate based on daily compounding. The Internal Revenue Code provides that the rate of interest be determined on a quarterly basis.

In addition, if you filed on time but did NOT pay on time, you will generally have to pay a late payment penalty of 1/2 of 1% of the tax owed for each month, or part of a month, that the tax remains unpaid after the due date, up to a maximum of 25%. The 1/2 of 1% rate increases to 1%, if the tax remains unpaid after several bills have been sent to you and the IRS issues a "Notice of Intent to Levy."

If you filed a timely return and are paying your tax pursuant to an installment agreement, the penalty is reduced to 1/4 of 1% for each month, or part of a month, that the installment remains unpaid.

If you did NOT file on time and owe tax, you may owe an additional penalty for failure to file unless you can show reasonable cause. The combined penalty is 5% (4.5% late filing, 0.5% late payment) for each month, or part of a month, that your return was late, up to a maximum of 25%.

The late filing penalty applies to both the tax shown on your return and any additional tax found to be due, as reduced by any credits for withholding and estimated tax and any timely payments made with the return. After 5 months, if you still have not paid, the 0.5% failure-to-pay penalty continues to run, up to 25%, until the tax is paid. Thus, the total penalty for failure to file and pay can be 47.5% (22.5% late filing, 25% late payment) of the tax owed.

Also, if your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $100 or 100% of the tax required to be shown on the return.

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