@tomekj wrote:
Thanik you for the detailed explanation. This confirms my intuition but I'm still waiting for the IRS explanation of the additional penalty.
Until the IRS issues a bill, the late payment penalty is 0.5% per month, and the interest rate is variable, from 4%-8% over the time frame indicated.
https://www.irs.gov/payments/quarterly-interest-rates
So the penalty plus interest for the 2021 excess (due April 15, 2022) would be $360, plus 43 months at 0.5% per month, plus 8% interest. It's roughly $100 more, I think. The penalty plus interest for the $720 that was due April 15, 2023 would be $720 plus 0.5% for 31 months plus 8% APR. And so on.
After you get a bill, the penalty for non-payment increases to 1% per month.
You can apply for a waiver or abatement of the penalty for cause, or as a "first timer". The interest can't be waived by law, but if the late payment penalty is waived, the interest would be recalculated.
https://www.irs.gov/payments/administrative-penalty-relief
