IRS Late Filing Penalty: Three Things You Need To Know

By: David R. Spacek


At any point in time, millions of Americans are facing IRS penalties and interest charges. Unfortunately, it is a common occurrence, especially considering the current state of the economy. But before you settle up with the IRS, make sure that you understand your situation.
Failure to file penalties are one of the most severe penalties that the IRS has in its arsenal. Failure to file penalties are 5% per month (or part of month) up to a maximum of 25%. If you dont have the funds to pay your tax bill, make sure that you at least file your taxes and you can work out a payment arrangement with the IRS later. That way you can at least avoid failure to file penalties.
Failure to pay penalties are 0.5% of the initial tax bill. These penalties are also capped at 25%. Should you ever find yourself in a situation where you cannot afford to pay your tax bill at least you need to file your return.
Taxpayers are often amazed (and of course disappointed) when they file their returns 6 months or so late and find out that their penalties and interest amount to 30-40% of the initial tax bill! This is what can put taxpayers into a financial mess that is hard to get out of.
Late filing and late payment penalties can be abated if the taxpayer can show reasonable cause. An abatement request is normally done by submitting a written statement to the director of the service center where the return was filed. You must include all facts and circumstances that led to the penalties.
The IRS can abate interest charges only in certain situations. These include situations in which there was an unreasonable error or delay by IRS employees or if the late payment occurred in an area that was a presidentially declared disaster area.
With more and more Americans facing IRS penalties and interest charges, people need to make sure that they are educated on the topic. If you find yourself falling behind with the IRS, do everything in your power to get caught up. They wont go away unless you address the issue head on.

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