How to Avoid a Fine If You Filed Your Tax Return Late
If you missed the extended tax filing deadline last week, you may be worried that the IRS will impose late filing penalties. However, if you don’t have a recent history of late filing, you can apply for a so-called first-time penalty reduction , which will remove some of your penalties from you. Here’s how to apply.
How IRS late payment penalties work
First, if you are expecting a refund, there is no late penalty; however, if you have tax arrears and missed the May 17 deadline without requesting an extension, you should apply as soon as possible to limit penalties and interest.
As a general rule, late filers must pay a penalty of 5% of your unpaid tax balance per month. But if you file more than 60 days after the tax filing deadline, your fine will be less than $ 435, or 100% of your unpaid tax balance . If you filed on time but could not afford to pay taxes, the penalty will be much less – 0.5% of your unpaid balance per month.
Please note that some taxpayers may have additional time to file their tax returns and pay any taxes due, including disaster victims , overseas taxpayers , military personnel, and eligible support personnel in war zones .
Reducing the penalty for the first time cancels late fees.
Now for the good news: if you have a history of filing and paying taxes on time, the IRS may be willing to waive those penalties by lowering the penalty for the first time along with the interest charged on your penalty. The agency may also offer reasonable-cause penalty relief , which includes things like natural disasters, not having access to your records, or the death or illness of a family member.
To be eligible for a penalty reduction for the first time, you must meet the following criteria:
- Three years of timely filing of documents and tax payments
- You have submitted all the required declarations at the moment or have applied for an extension of the submission deadline
- What you paid – or agreed to pay – any money you owe
How to apply for a penalty reduction for the first time
If you have received a notice of refusal to apply from the IRS, get a toll free number in the upper right corner and call the agency to find out if you are eligible to receive assistance in the form of reduction or other failure. (Lines are often busy, so read this post on Lifehacker about redirecting to an agent).
Alternatively, if you would prefer to submit your request in writing, you can also contact the IRS by mail, but it may take up to 30 days for a response to be received. Also, one more tip: you can increase your chances of being exempted by making an inquiry after paying your tax balance. If you receive a notice or letter stating that the IRS did not grant your request for a waiver of the penalty, you can use the online self-help tool to appeal the fines .
This story was originally published on August 7, 2020 and has been updated on May 27, 2021 with more information.