Ken Lewellyn discusses federal penalties and interest on taxes. Perhaps the most common IRS penalties assessed are the late filing and late payment penalties.

Late Filing Penalty

If a person is late on their tax return, the penalty for failure to file is 5 percent (5%) per month on the amount owed.

Late Payment Penalty

If a person is late on the payment of taxes owed, the IRS will levy a penalty of a half a percent (.5%) per month on the amount due.

Penalty Abatement and Reduction

Penalties and interest can be abated or reduced where you may meet certain exceptions. To request a reduction or abatement of tax penalties, taxpayers must request so in writing with the IRS. To do so, taxpayers must assert that reasonable cause exists and that due to this reason, or reasons, the taxpayer was unable to comply with filing or payment requirements.

The reasons for requesting relief are varied. The most common exceptions are due to illness, death, divorce, mental health, exception.

Although certain exceptions are listed within tax law, most qualifying taxpayers can provide a reason, or reasons, for failing to file or failing to pay taxes when due for other reasons, not specifically identified within the underlying tax law.

The payment of penalties and interest will not necessarily stop any relief that you would be otherwise entitled to. For this reason, taxpayers will often pay the penalties and interest now and request an abatement of the penalties later. This strategy will stop any collection efforts to obtain these amounts and you will not give up the rights you may have to obtain penalty relief.