Reducing Penalties and Interest on Unpaid Taxes

Those who missed the April deadline for filing their 2023 taxes still have options for paying off those debts. There are also a number of penalty and interest relief programs for which certain taxpayers can qualify.

Interest Rates and Penalties for Unpaid Taxes 

Those who owe taxes to the IRS and who were unable to make their full payments in April are being encouraged to take steps towards addressing the unpaid balance as soon as possible to limit penalty and interest charges. Currently, the interest rate for unpaid taxes is eight percent and is compounded daily. This is in addition to the late filing penalty, which amounts to five percent per month, as well as the late payment penalty, which is .05 percent every month, with both maxing out at 25 percent. For returns filed more than two months after the due date, the lowest penalty that a taxpayer faces will be the lesser of either:

• $485; or
• 100 percent of the unpaid tax.

The failure to pay penalty rate will remain at .05 percent of the unpaid amount and be levied each month until the amount is fully paid or until the penalty has reached 25 percent of the total owed. Fortunately, there are ways to limit these penalties and interest charges. Read on to learn more about the options for which you might qualify.

Filing and Paying Taxes Owed to Reduce Penalties 

The best way that taxpayers can limit the accrual of penalties and interest on unpaid tax debts is to file their returns and pay what they owe as soon as possible. It’s important to remember that those who received an extension to file don’t also have an extension to pay, so even if a taxpayer has an additional six months to file his or her return, penalties and interest will start to accrue after April 15th on any unpaid tax balances.

Applying for Penalty Relief 

Some taxpayers, namely those who have filed and paid their taxes on time and not been assessed penalties over the last three years, may also qualify for first-time abate penalty relief, even if they still have unpaid taxes. It’s important to note, however, that the penalty for failing to pay taxes on time will continue to increase until the amount is paid in full. Even those who don’t qualify for first-time penalty abatement could still be eligible for relief if their failure to pay was the result of reasonable cause and not willful neglect. Unfortunately, federal law doesn’t allow for the abatement of interest on unpaid taxes even for reasonable cause or first-time relief.

Call or Contact Ronald Cutler, P.A. Today 

To learn more about the types of tax penalty relief for which you could qualify, please reach out to CPA, former FBI Special agent, and experienced Florida and nationwide unfiled tax lawyer Ronald Cutler, P.A. at 386-490-9949 today. We know how stressful it can be to have an unpaid tax debt hanging over you and will put all of our experience and resources towards helping you resolve your tax-related issues.

Sources: 

irs.gov/newsroom/irs-has-options-to-help-people-who-missed-the-april-filing-deadline

irs.gov/payments/penalties