Minimizing IRS late penalties

If you missed the IRS deadline, you might have several options for reducing your late filing penalties.

You should file your tax return and pay any taxes you owe as soon as possible to reduce penalties and interest. However, you should file your return even if you don’t have the money to pay your taxes.

The late-filing penalty is 5% of the tax owed for each month or part of a month up to five months. If a return is filed more than 60 days after the due date, the minimum penalty is $435 or 100% of the unpaid tax, whichever is less.

The failure to pay penalty rate is generally 0.5% of the unpaid tax owed for each month or part of a month until the tax is fully paid or until 25% is reached. However, the rate is subject to change.

The failure to file penalty is ten times as much as the late-paying penalty. As an example, if you owed $4,000 and filed five months late, the failure to file penalty would be $1,000. The late paying penalty would only be $100.

If you are late filing your return, file as soon as possible to avoid the larger late filing penalty.

An extension to file is not an extension to pay. However, filing the extension avoids the more significant late filing penalty. An extension extends the deadline for an additional six months.

You may qualify to have your penalties abated. The IRS provides relief from late filing penalties with the IRS First Time Abatement policy. You may qualify if you had no penalties for the three previous tax years. You can call the IRS and request first-time abatement if you believe you qualify. The IRS will let you know if you qualify.

Late filing penalties can also be abated for reasonable cause. The IRS will consider any sound reason for failing to file a tax return, make a deposit, or pay tax when due. Good reasons for reasonable cause abatement include natural disasters such as fire and casualty, inability to obtain records, serious illness, or death. Most reasonable cause explanations require that you provide documentation to support your claim.

If you have successfully had your late filing penalties abated, the failure-to-pay penalty will continue to accrue until the tax is paid in full.

In and of itself, a lack of funds is not reasonable cause for failure to file or pay on time. However, the reasons for the lack of funds may meet reasonable cause criteria for the failure-to-pay penalty.

People who owe no taxes or are due are not penalized for filing late. I've seen many people panicking about the deadline even though they knew they were getting large refunds. They believed that everybody was required to file their return by April 15. Unfortunately, they were panicking for absolutely no reason. However, if you wait more than three years to file your return, the IRS generally won’t allow your refund.

If you missed the IRS filing deadline and failed to file an extension, you should file as soon as possible to avoid additional penalties.

David Zubler has an accounting degree and computer science degree with high distinction and has experience as an accounting manager and controller in manufacturing, and has owned his tax/consulting business since 1990.  David Zubler is the founder and president of Your Tax Care.  The company provides business and tax education to the public at its website,  David can also be contacted by email at