Preparing a tax return can be nerve-wracking process. You give a tax preparer your information, they input the data and ask some questions, and the software tallies your total tax bill. Sometimes that amount is larger than you can afford, and you can only partially pay the amount owed when filing your tax return. When this happens, there’s a penalty for not paying the full amount shown on your tax return.
Note – there’s another penalty for not paying all estimated taxes owed on time.
Failure to pay tax reported on a tax return = .5% per month (25% max)
One of the most common tax penalties assessed by the IRS is the failure to pay penalty. The IRS imposes a delinquency penalty when there is a failure to pay the “self-assessed” amount shown on a filed tax return and the assessed tax within ten days after the date of the IRS notice. The penalty is 0.5 percent for each month of the delinquency up to a maximum of 25 percent or 50 months (about 4 years). A penalty will not be imposed upon a taxpayer if he pays within 21 calendar days from the date of the notice and demand or within ten business days if the corresponding amount is $100,000 or more. The tax penalty will not likewise accrue when the failure to pay the tax or deficiency is not due to willful neglect but due to a reasonable cause.