Late Income Tax Return Penalties
Failure to File Penalty: If a taxpayer is required to file an income or excise tax return and fails to timely do so, a late filing penalty may be assessed. The penalty is 5% of the amount of unpaid tax per month the return is late, up to a maximum of 25%. A minimum penalty of $135 may apply for late filing of an income tax return.
Failure to Pay Penalty: If a taxpayer is required to pay an amount shown on his return, but the taxpayer fails to pay such amount, there is a penalty of .5% of the amount of unpaid tax per month the return is late up to a maximum of 25%.
Failure to Show Penalty: If a taxpayer is required to shown an amount not so shown on his return, then the taxpayer is liable for the failure to show penalty at a rate of .5% per month the amount is not so shown, up to a maximum of 25%.
If both the failure to file and the failure to pay penalties apply during the same month, then the failure to file penalty is reduced by .5% each month.
The 25% cap above applies to the 5% late filing penalty and the 0.5% late payment penalty together. The late filing penalty may be waived or abated on showing of reasonable cause for failure. The failure to file penalty starts to accrue interest from the date the return was due, whereas the failure to pay and failure to show penalties begin accruing interest from the date of notice and demand.
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