tax tips for tax year 2008
Late Charges, Penalties & Interest
If you do not file on time and owe tax, you will generally be assessed a late filing penalty of 5% of the tax owed for each month, or part of a month, that your return is late until the return is filed or a maximum 25% penalty is applied. If your return is over sixty days late, the minimum penalty for late filing is $100 or 100% of the tax owed, whichever is smaller.
If you file on time but do not pay all amounts due, you will generally have to pay a late payment penalty of 0.5% of the tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full or a maximum 25% penalty is applied. The 0.5% rate decreases to 0.25% for any month in which an installment agreement is in effect but increases to 1% if tax remains unpaid ten days after the Internal Revenue Service issues a notice of intent to levy.
Furthermore, if you do not pay all amounts due on time, interest is charged on any unpaid tax from the due date of the return until the date of payment. Interest charged on late payments changes quarterly and has ranged from a high of 9% to a low of 4% during the past several years. Beginning January 1, 2009, the interest rates will be:
• Five (5) percent for overpayments; and
• Five (5) percent for underpayments.