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Failure to Pay Taxes: Penalties and Interest

Failure to pay your taxes can result in the Internal Revenue Service (IRS) assessing penalties and interest. The penalties depend on the type of non-payment and the amount of time that elapses until the tax bill is paid in full. Many taxpayers are unsure of how much they owe and how much their tax penalties will continue to grow until paid. If you have unpaid federal or Maryland state taxes, contact Juda Gabaie at Gabaie & Associates, LLC for help. 

IRS Penalty and Interest Charges

IRS penalties are assessed on unpaid taxes. The IRS charges a financial penalty for failure to file, failure to pay, or failure to pay the proper estimated tax. On top of the penalties, interest is also imposed on unpaid taxes and continues to accrue until the payment is made in full. 

Interest for Failure to Pay Taxes

Interest accrues on any unpaid tax from the due date of the return until the date of payment in full. For most taxpayers, the due date of your taxes falls on or around April 15th. Any unpaid taxes after that date may begin to accrue interest. The interest rate is determined quarterly at the federal short-term interest rate plus 3%, compounded daily.

Filing an extension only extends the amount of time you have to file a return but the extension does not give you more time to pay taxes. Your taxes are still due on the original tax due date. If you do not pay your taxes until the extension deadline, you may be assessed interest on the unpaid taxes. 

Penalties for Failure to Pay Taxes Reported

In addition to interest, you may be required to pay a late payment or failure-to-pay penalty. The failure to pay penalty is assessed at 0.5% (one-half of one percent) for each month or partial month the payment is not made. The maximum penalty for failure-to-pay is 25% of the amount of taxes unpaid from the due date of the return until the payment is made in full. 

If the IRS issues a notice of intent to levy property based on unpaid taxes, the penalty rate will increase to 1% if the tax remains unpaid 10 days after the notice is issued. Alternatively, if you request an installment agreement, the failure-to-pay penalty will reduce to 0.25% for any month where the payment agreement is in effect.   

Penalties for Failure to Pay Estimated Taxes

Individuals are required to make tax payments throughout the year based on income received. This generally involves withholdings from your paychecks or making estimated tax payments. If you fail to make enough tax payments through withholdings or estimated tax payments, you may be assessed a penalty. 

Tax Penalty and Interest Disputes

The IRS does make mistakes. Alternatively, someone else may have reported income tax under your Social Security Number, making it look like you owe more tax than you really do. If you dispute the tax assessment, penalties, or interest assessed, talk to your reliable tax attorney about your options. You may be able to challenge the assessment, negotiate a reduction in penalties, or arrange a payment plan. 

Questions About Your IRS Tax Notice 

If you received a notice of unpaid taxes, tax underpayment, or if you need help negotiating a tax offer in compromise, contact Gabaie & Associates, LLC  for a free consultation. You can contact Juda Gabaie online or call (410) 862-2198 for help with your IRS or Maryland tax issues.

Contact Us Today!

Time is of the essence when it comes to tax-related issues. If you are uncertain as to what your next step should be, contact the reliable tax attorneys at Gabaie & Associates, LLC today.