Tax Tip #159

Ralph Loggia • September 12, 2023

The Failure to Pay Penalty

The failure to pay penalty is issued when the tax liability is not timely paid. This penalty is 0.5% of your unpaid tax per month, up to 25% of your total tax bill. There’s interest on top of the penalty itself that builds until the tax is paid.

 

Example: Taxpayer files an extension with the IRS on 4/15/2023 & owes $1K but does not pay the balance due. Tax return is filed on 9/9/2023. The taxpayer owes tax of 1K + a penal­ty of $25 + interest.

 

The $25 penalty calculation is: .005 * 5 months * $1,000 = $25.

 

If this was the actual penalty amount assessed by the IRS, then the amount should be paid. However, what if there were a few zero’s added to the end of that amount. Then it might make sense to look into penalty relief, if applicable. If this is the case, reach out to a team member. There are options available that the G&L team members are aware of which might apply to have the penalty abated.


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