IRS interest penalties are generally based on a percentage of the amount of unpaid taxes owed. Fees accrue for various penalties, including late filing, late payment, failure to file and underpayment, according to the Internal Revenue Service.Continue Reading
As of 2015, interest charged on unpaid taxes accrues at the federal short-term rate plus 3 percent and compounds on the unpaid amount as of the date due, with no regard to any extensions, according to the Internal Revenue Service. The federal short-term rate changes on a quarterly basis and is updated through an IRS news release.
If tax is not paid on time, a taxpayer is subject to a failure-to-pay penalty, according to the IRS. A failure-to-pay penalty is 0.5 percent of the tax owed for each month or part of a month that the tax goes unpaid, up to 25 percent as of 2015. This rate increases to 1 percent if the tax is not paid within 10 days of the IRS issuing a final notice. The interest charge on unpaid tax can be charged concurrently with the failure-to-pay penalty. If a taxpayer files on time and is paying through an installment plan, the rate drops to .25 percent.
If tax is due and a taxpayer does not file on time, a penalty for failure to file can also be assessed, according to the IRS. The combined failure to file penalty is 5 percent, which includes 4.5 percent for late filing and 0.5 percent for late payments, for each month or part of a month that a return is late, up to 25 percent.Learn more about Income Tax