Failure to Pay & File Penalty Calculator

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IRS imposes Failure to file and failure to pay penalty very commonly on taxpayers who did not file tax tax return within due date or did not pay tax on income shown on return or as reflected in the notice of adjustment.The penalty calculator created by us will help you compute the penalty for failure to file or failure to pay by taking into account following circumstances :

IRS Penalty Calculator

Failure to Pay Penalty Calculator

How Failure to File Penalty Calculated ?

Failure to file penalty is charged when you file tax return beyond the tax filing due date or extended date or for not file tax return reasonable cause for filing late. The calculation of penalty for failure to file takes into account following rules:

  • The failure to file penalty rate is 5% of the unpaid taxes for each month or part of a month that a tax return is late.
  • The penalty won’t exceed 25% of your unpaid taxes.
  • When a taxpayer is charged with penalty for both type of failures i.e failure to file as well as failure to pay -the rate of failure to pay penalty is reduced by 0.5 % for months when both penalties are imposed . Thus the combined penalty is 5% (4.5% late filing and 0.5% late payment per month.The maximum total penalty for both failures is 47.5% (22.5% late filing and 25% late payment) of the tax.
  • If the delay in filing tax return is over 60 days late, the minimum failure-to-file penalty is the smaller of $435 or 100% tax due.

How Failure to Pay Penalty Calculated?

When you fail to pay tax due – as per your return or as per the demand notice by IRS , you pay failure to pay penalty. Following rules affect computation of this penalty

  • The rate of late payment penalty is 0.5% of the tax owed
  • Even one day counts as a month.
  • Maximum possible penalty for failure to pay is 25% of the tax due.
  • The rate of penalty which is generally 0.5% . But this rate changes in following circumstances
    • 10 days after the IRS issues a final notice of intent to levy or seize property, the 0.5% rate increases to 1% per month.
    • If there is an installment agreement with IRS, the penalty rate is 0.25% for each month or part of a month as long as that installment agreement is in force.

First Time Penalty Abatement

If you failed to pay in time, it is not that you can not get waiver of such a penalty.Under the Internal Revenue Code, there are two ways to get that penalty for failure to pay removed. One is by explaining IRS the reasonable cause for failure to pay and the second is totally at discretion of IRS to all you a first-time penalty abatement under which you may qualify if certain conditions are fulfilled. Please read this post on first time penalty abatement.

Which provision of law handles failure to pay & file penalty?

Failure to file penalty is dealt under IRC § 6651(a)(1) where as law for imposing penalty for failure to pay tax as per your return is provided under IRC § 6651(a)(2).

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By Prashant Thakur

Prashant Thakur is a tax advisor . He has written two books on tax laws of India. He regularly writes on his paid-only website http://taxworry.com. He is learning about the Internal Revenue Code of USA as many of clients and readers are of India origin and also are tax resident of USA . So . solving their tax issues require reference to IRC of USA.