What happens if you don't file a tax return or pay taxes that you owe by their due date? Generally, in this situation the IRS will send you a notice hitting you with interest and penalties.
Interest. The IRS will charge you interest on taxes not paid by their due date, even if you've been granted an extension of time to file your return. The interest rates for most taxpayers are based on the federal short-term rate plus three percentage points. The most recently announced interest rate on underpayments of tax is 3 percent.
Interest is also charged on the penalties imposed for failure to file a return as well as other penalties imposed for negligence, fraud, etc. This interest is charged on the penalty from the due date of the return, including extensions.
Penalties. If you pay your taxes late, the penalty is usually 0.5 percent of the unpaid amount for each month or part of a month the tax is not paid. The penalty can't be more than 25 percent of the unpaid amount and applies to any unpaid tax on the return. Please note, this penalty is in addition to the interest charged for late payments.
The IRS will also hit you with a penalty if you file your return late. If you don't file your return by its due date (including extensions), the penalty is usually 5 percent of the amount due for each month or part of a month your return is late, unless you have a reasonable explanation. If you think you have a reasonable explanation, write it down in a statement and attach it to your return, and you might be able to avoid the penalty. In any case, the penalty usually can't be more than 25 percent of the tax due. However, if your return is more than 60 days late, the minimum penalty will be $100 or the amount of any tax you owe, whichever is smaller.
