Missing a tax deadline can be stressful, but ignoring it will only make things worse. If you owe taxes and haven’t paid yet, the IRS starts adding late payment penalties and interest immediately. The good news? There are ways to reduce what you owe and avoid costly mistakes.
What Happens If You Pay Taxes Late?
When you miss the payment deadline, the IRS applies two types of late payment penalties:
1. Failure-to-Pay Penalty
- 0.5% per month on unpaid taxes, up to a maximum of 25%.
- Starts the day after the tax deadline
2. Interest on Unpaid Taxes
- Charged daily, based on the federal short-term rate + 3%. The IRS provides more details on how interest is calculated on unpaid taxes.
- The longer you wait, the more you owe.
Important Note: If you haven’t filed your tax return yet, there’s also the Failure-to-File penalty, which is much worse—5% per month, up to 25%.
How to Minimize IRS Late Payment Penalties
If you missed the deadline, here’s what to do right now to limit penalties and interest:
1. File as Soon as Possible, Even If You Can’t Pay in Full
Filing your return stops the Failure-to-File penalty, which is the largest penalty the IRS applies. Even if you can’t pay the full amount, filing as soon as possible will help you avoid additional fees. Learn more about penalties and how to avoid them on the IRS’s Penalties page.
2. Pay What You Can Right Away
Even partial payments help reduce penalties and interest. Every dollar you pay now stops interest from compounding. If you can’t pay the full amount, sending whatever you can will slow the growth of your balance.
3. Set Up an IRS Payment Plan
If you owe more than you can afford, the IRS offers installment agreements, allowing you to pay over time. Some payment plans come with low fees and no additional penalties if you qualify.
You can apply for a payment plan online through the IRS’s Online Payment Agreement Application.
Final Thoughts: Take Action Now to Reduce IRS Late Payment Penalties
If you missed the tax deadline, do not wait. The sooner you act, the more you will save on penalties and interest. File, pay what you can, and set up a plan if needed.
At Beckley & Associates PLLC, a trusted advisory, tax and accounting CPA firm in Plano, TX, we help individuals and small business owners with IRS payment options and tax-savings strategies.
Contact us today to discover how our local expertise can support your financial success.
