How to Avoid Paying a Penalty If You File Your Taxes Late
If you miss the tax filing deadline this week, you may be worried that the IRS will hit you with penalties for late filing. However, if you don’t have a recent history of late filing your taxes, you may be able to apply for what’s called a first-time penalty reduction , which will remove some of your penalties. Here’s how you can apply.
How IRS late fees work
First, if you are expecting a refund, there is no late filing penalty; however, if you owe taxes and missed the April 15 deadline without requesting an extension, you should file as soon as possible to limit penalties and interest.
Generally, late filers are required to pay a failure to file penalty equal to 5% of your unpaid tax per month (although the total penalty will not exceed 25% of the tax you owe). But if you file your tax return more than 60 days after the tax filing deadline, your penalty will be the lesser of $435 or 100% of your unpaid tax balance . If you filed your return on time but can’t afford to pay your 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 taxes and pay taxes due, including victims of natural disasters , taxpayers living overseas , military personnel and eligible support personnel in combat zones .
Reducing the fine for the first time will lead to the cancellation of the late payment penalty.
Now, the good news: If you have a history of filing and paying your taxes on time, the IRS may be willing to waive those penalties by reducing the penalty the first time, along with the interest charged on your penalty. The agency may also offer a waiver of the fine for good cause , which includes things like natural disasters, lack of access to your records, or the death or illness of a family member.
To qualify for a fine reduction for the first time, you must meet the following criteria:
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Three years of timely filing of returns and payment of taxes
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You have filed all currently required returns or have applied for an extension of the filing deadline
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That you have paid or agreed to pay any amount you owe
How to apply for a fine reduction for the first time
If you receive a notice of failure to file a tax return from the IRS, look for the toll-free number in the upper right corner and call the agency to find out if you qualify for an exemption or other waiver. (The lines are often busy, so check out this Lifehacker post for some tips on getting referred to an agent).
Alternatively, if you prefer to submit your request in writing, you can also contact the IRS by mail, but it may take up to 30 days to receive a response. One more tip: You can improve your chances of getting help by filing your claim after paying your tax balance. If you receive a notice or letter that the IRS has not granted your request for penalty relief, you can use the online Penalty Appeal Self-Help Tool .