When dealing with the Internal Revenue Service and income tax payments, time is always of the essence. Deadlines are important, and failing to follow them can result in fines and penalties. In addition to the time factor, there is a subtle difference between simply filing your taxes on time, and actually paying the taxes that are due. As such there are two different penalties involved if one or both of these actions are not correctly completed. The two types of penalties related to failure to file taxes vs. failure to pay taxes are similar, but different enough that they have separate fines and levies attached to them.
Tax Rules for Non-Filing or Non-Payment
- Failure to file taxes means basically what its name indicates: You have failed to file an income tax return for a given year or period of years by the deadline indicated by the IRS.
Failure to file taxes will cause the IRS to assess a penalty of 5% of the tax due for each month that the payment is not received after the due date. The penalty can never exceed 25% of the total tax debt, and if you are more than sixty days in arrears, you will pay the lower amount of a flat penalty of $100 or 100% of the total tax amount due. If there is some compelling reason that you could not file your taxes on time, the penalty can be waived by the IRS.
- Failure to pay taxes means that you filed a return but did not pay the money that was due, whether the full amount of your taxes, or just the portion that was not withheld that was due in excess of your estimated tax liability.
Failure to pay can cause you to receive a penalty of one half of one percent of the total tax liability for each month that the amount is not paid in full. However, the total amount due from fines can never exceed 25% of the total tax amount that was due. Again, if there is a reason you have been unable to pay, the fines can be waived.
Getting Help
The failure to pay penalty can occasionally eliminate the failure to file penalty, such as if you are able to file and pay the tax due and settle everything with the Internal Revenue Service at one time. You will want to contact a competent tax attorney if you find yourself in a position where you are being charged with failure to pay or failure to file tax penalties to understand your rights and obligations.
