Failing to file your tax return by the deadline can result in penalties while failing to pay your taxes on time can also lead to penalties and interest charges accruing. Here's a summary of the penalties:
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Late Filing Penalty: If you fail to file your tax return by the deadline, the penalty is typically 5% of your unpaid tax bill for each month or part of a month that the return is late, up to a maximum penalty of 25% of the tax owed. This penalty is based on the amount of tax due.
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Late Payment Penalty: If you file your tax return on time but fail to pay the taxes owed, the penalty is generally 0.5% of the unpaid tax bill for each month or part of a month that the payment is late. This penalty is also based on the amount of tax due.
In both cases, interest charges also apply to the unpaid tax amount, compounded daily. The interest rate is set by the IRS and may vary over time. For more context on the failure to file penalty, see this IRS link.
It's important to note that if you have an accepted installment agreement with the IRS to pay your taxes over time, you will still accrue interest on the unpaid amount, but the interest charges may be reduced.
The best course of action, if you are late to file your tax return, is to pay and file your tax return as soon as possible. By doing so, you can minimize the penalties and interest charges that may accrue. It's always recommended to promptly address any tax obligations to avoid further penalties and potential legal consequences.