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Rev. date: 09/21/2012

IRS Notices and Bills, Penalties and Interest Charges

Tax Topic 653
April 15 is the deadline for most people to file their individual income tax return and pay any tax owed. Tax returns are checked for mathematical accuracy. If there is any money owed, you will be sent a bill. Generally, interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is determined quarterly and is the federal short-term rate plus 3 percent. Interest is compounded daily. If you file a return but don't pay all amounts shown as due on time, you'll generally have to pay a late payment penalty of one-half of one percent 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 the 25% maximum penalty is reached. The one-half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. For individuals who file by the return due date, the one-half of one percent rate decreases to one-quarter of one percent for any month in which an installment agreement is in effect.
If you owe tax and don't file on time, the total failure to file penalty is usually five percent of the tax owed for each month, or part of a month that your return is late, up to five months. If your return is over 60 days late, the minimum penalty for late filing is the lesser of $135 or 100 percent of the tax owed.
You must file your return and pay your tax by the due date to avoid interest and penalty charges. Often the funds necessary to pay your tax can be borrowed at a lower effective rate than the combined IRS interest and penalty rate.
To ensure your payment on a bill for tax is credited properly, be sure to return the tear-off stub on your bill and use our return envelope, if provided. Please make your check or money order payable to the United States Treasury. Enter the primary social security number or employer identification number, the tax year and form number, and your telephone number on your check or money order.
The penalties for filing and paying late may be abated if you have reasonable cause and the failure was not due to willful neglect. If you're billed for penalty charges and feel you have reasonable cause, send your explanation along with the bill to your service center, or call the IRS at 800-829-1040 for assistance. In addition, making a late payment as soon as you are able may help to establish that your initial failure to pay was due to reasonable cause and not willful neglect. Generally, interest charges are not abated; they continue to accrue until all assessed tax, penalties, and interest are paid in full.
There are possible exceptions to the general deadlines for filing a return and paying tax. One possible exception is if you are a member of the armed forces and are serving in a combat zone. Refer to Publication 3, Armed Forces' Tax Guide, for additional information and qualifications. The second is if you are a citizen or resident alien working abroad. Refer to Publication 54, Tax Guide for U. S. Citizens and Resident Aliens Abroad, for information.
If you believe there is an error on your notice or bill, write to the IRS office that sent it to you within the time frame given. You should provide photocopies of any records that may help correct the error. Also, you may call the number listed on your notice or bill for assistance. If you are correct, we will make the necessary adjustment to your account and send you a corrected notice.
For more information about IRS notices and bills, refer to Publication 594, The IRS Collection Process. More information about penalty and interest charges is contained in Part One, Chapter 1, Filing Information, of Publication 17, Your Federal Income Tax.