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Penalties for Not Doing Your Taxes

Audio version available here (1 min. 35 sec.)

If for one reason or another you have not paid your 2023 taxes and/or filed your tax return, it’s not the end of the world. However, you may need to face consequences handed down by the IRS. These can include hefty monetary penalties. Here are the penalties that can occur for those who have not paid or filed their federal taxes.

There are two primary penalties a taxpayer can face for not doing their taxes: the Failure to File penalty and the Failure to Pay penalty. They are based on a taxpayer’s unpaid tax balance. This year, the late-filing penalty is “5% per month” while the late-payment penalty is “0.5% per month”. Both penalties are cumulative and “max out at 25%”, and any unpaid tax balance has an interest rate of 8%.

If you file your return more than 60 days after the due date, the minimum penalty is $485 or 100% of the unpaid tax. As we are now past that point, it is imperative to pay and file your taxes as soon as possible to avoid accumulating more interest. Both penalties have the potential to become large sums, but the Failure to File penalty’s 5% rate adds up a lot faster. Even if you do not have the ability to pay your taxes in full yet, filing your tax return now can help alleviate the financial burden.

There are ways to get penalties removed. The IRS’s Penalty Relief page contains various resources for taxpayers to appeal or waive their penalties. Though you are not guaranteed to have your penalties removed, trying all your options can prove beneficial.

The best scenario is to avoid having penalties handed down to you in the first place. File and pay your federal taxes on time. If you did not pay or file by the April deadline, pay what you can now and consider filing your tax return as soon as possible. If you need assistance, please reach out to XQ CPA. We will be happy to guide you.

For further information on this topic, watch our YouTube video on this matter:

Phone: 832-295-3353

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Want to pay less taxes? Read XQ CPA's official tax planning guidebook! How to Grow Your Wealth Through Tax Planning.


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