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Level 8

Avoiding Late Filing Penalty

If you owe an amount due and are filing late (like without an extension, or after the extension expired), is it possible to avoid the late filing penalties (but obviously not late payment penalties, of course) by simply paying late estimated taxes instead, so that the return filed now shows no amount due?

1 ACCEPTED SOLUTION

Accepted Solutions
Level 8

Avoiding Late Filing Penalty

Upon reading the actual section of the IRC (26 U.S. Code § 6651 - Failure to file tax return or to pay tax), it appears to me that this approach would not work, because the way "Net Amount Due" is defined for use in computing the late filing penalties and late payments, anything paid after the April 15th due date (regardless of whether you received an extension of time to file) are not credited against the net amount of tax due!  Thus, IRS is supposed to figure the late filing penalty amount almost the same way as the late payment penalty and late payment interest, by using the amount of additional tax due but not paid as of the April 15th due date as the deficiency amount.

3 Comments
Level 15

Avoiding Late Filing Penalty

It won't work. Once the IRS receives the late return, they'll process it and then bill you separately for the late filing fees and anything else related to "late" that may be assessed.

Level 8

Avoiding Late Filing Penalty

The IRS late filing penalty is based on the amount due on the return. If the amount due on the return is $0 or a refund, there is no penalty (or, more accurately, the penalty is $0).

So why won't this work? What tax amount will IRS use to figure the late filing penalty?
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As an aside: I personally know that if you owe a late payment penalty when filing your return, and you subsequently amend the return such that the amount owed on the original return was unnecessary and the late payment penalty shouldn't have been assessed, IRS still keeps the penalty anyway.
Level 8

Avoiding Late Filing Penalty

Upon reading the actual section of the IRC (26 U.S. Code § 6651 - Failure to file tax return or to pay tax), it appears to me that this approach would not work, because the way "Net Amount Due" is defined for use in computing the late filing penalties and late payments, anything paid after the April 15th due date (regardless of whether you received an extension of time to file) are not credited against the net amount of tax due!  Thus, IRS is supposed to figure the late filing penalty amount almost the same way as the late payment penalty and late payment interest, by using the amount of additional tax due but not paid as of the April 15th due date as the deficiency amount.