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The penalty for paying your taxes late is 0.5% of your taxes owed for each month or partial month your bill is unpaid.
The maximum late-payment penalty is 25% of taxes owed.
You may avoid penalties if you can prove a "reasonable cause" for not paying on time.
The IRS offers payment plans that can reduce your late-payment penalties.
What happens if you don't pay your taxes, or pay your taxes late?
If you didn't pay your taxes by the filing deadline, even if you got a tax-filing extension, it may mean paying even more money to the IRS later in the form of penalties and interest.
Here are some consequences of not paying taxes — on time or at all — and how quickly the IRS will act.
Immediately: Interest and penalties start
If you don’t pay your tax bill in full by the filing deadline, the IRS will charge interest on whatever amount is outstanding. The IRS may also levy a late-payment penalty (sometimes also called a failure-to-file penalty) of 0.5% per month, with a maximum penalty of 25% of your unpaid taxes.
The agency urges you to pay at least a portion of your bill as soon as possible to limit penalties and interest.
1-3 months: Notices start to arrive
If you're issued a failure-to-pay penalty, you will get a letter noting that there's a balance due. You may get more than one letter. The IRS says if you can prove a reasonable cause for paying late or if this is your first offense, you may avoid paying the penalty.
2-6 months: Tax liens and collections calls may happen
A tax lien is a legal claim against property and financial assets you own or may have coming to you. It’s not a seizure of your assets, but it is a claim on them. If you sell the asset, the government could be entitled to some or all of the proceeds.
Liens are often public records. That means that even if they're not on your credit report, liens could affect your ability to get loans, get a job or keep a security clearance. Filing for bankruptcy may not necessarily get rid of the lien or your tax bill.
The IRS may send your account to a private collection agency. The IRS will send you a notice should that happen, and it will give you the collection agency’s contact information.
3+ months: IRS levies and passport restrictions
A tax levy is the actual seizure of your assets — property, bank accounts, Social Security payments or even your paycheck — to pay your debt.
The IRS can levy, seize and sell any type of personal property that you own or have an interest in, such as your car, or real estate, and apply that money to your unpaid tax bill.
Ten days after a notice of intent to seize or levy is issued, the late-payment penalty rises to 1% per month, according to the IRS. On top of all that, the State Department may not issue or renew your passport, and it might even revoke it, if your accrued federal tax debt is over $62,000.
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How to keep all this from happening
The obvious answer is to pay on time. If you can’t afford your tax bill, the IRS offers payment plans that could help. Enrolling in one shows you’re making an effort, plus it could help ward off levies.
To keep the problem from happening again next year, review your Form W-4 to make sure you’re having enough tax withheld from your paychecks during the year to cover your expected tax bill.
And above all, don’t play with fire. The longer a tax problem goes unresolved, the harder it can be to deal with it.