According to the IRS, failure to file taxes can result in severe payment penalties. These penalties can grow on a monthly basis, maxing out at as much as 100 percent of the actual tax monies owed.
A failure-to-file penalty is incurred if a taxpayer does not file taxes by the filing date, according to the IRS. If an extension is filed, then the failure-to-file penalty does not occur until after the extension date. The penalty for filing late is five percent of the money owed per month, with a maximum penalty of 25 percent. If the due date is exceeded by 60 days, however, then the penalty for failing to file is a minimum of $135 or 100 percent of the unpaid tax amount, whichever amount is smaller.
In some cases, a taxpayer may incur a failure-to-pay penalty along with the failure-to-file penalty. When this happens, the failure-to-pay penalty is reduced by the amount of the failure-to-file penalty, according to the IRS. If filed more than 60-days late, there will still be a minimum payment due of $135 or 100 percent of the unpaid tax amount. The failure-to-file penalty can be avoided if the taxpayer can show reasonable cause for the failure as opposed to neglect.