Penalties for filing IRS taxes late include a failure-to-file penalty, a failure-to-pay penalty if a taxpayer owes taxes or losing a refund if taxes are not filed within three years. IRS penalties accumulate monthly due to interest on unpaid taxes, and the penalty reaches a maximum at 25 percent of the total unpaid taxes.
The IRS explains the failure-to-file penalty is generally more than the failure-to-pay penalty. Taxes filed before the annual deadline prevent further penalties on taxes owed, even if a taxpayer cannot pay the entire amount owed. The IRS states the agency works with taxpayers to negotiate a way to pay, such as getting a loan or filing an installment agreement request. The IRS may hold income tax refunds if past-due amounts have not been paid.
The penalty for filing late is 5 percent of the unpaid taxes for each month the amount is late. The penalty begins the day after the tax filing deadline, according to the IRS. The failure-to-pay penalty is one-half of 1 percent of the unpaid taxes, which accrues monthly and begins the day after the filing deadline. If both penalties apply, the maximum penalty is 5 percent.
The minimum penalty for filing taxes more than 60 days late in one tax year is $135, or 100 percent of the unpaid taxes, whichever is less. Failure to file IRS taxes on time may also delay loan applications for mortgages and federal aid for higher education.