Are you aware of the many different fees and penalties that the IRS can impose on you for filing taxes inaccurately or not filing your tax return at all? While there are numerous fines available to the IRS, there are a few common penalties that you should be especially aware of, including late filing and non-payment penalties, as well as fees charged for not paying enough in your estimated tax payments, negligence penalties and substantial understatement penalty fees.

Here are all of the important facts that you need to know about the most common penalties and fees imposed by the IRS.

Failure-to-File Penalty

The failure-to-file penalty is added to your tax bill if you fail to either file your tax return or apply for a tax filing extension on or before the deadline in any given year and taxes were owed at the time of the tax deadline. The penalty can be costly, so you’ll want to avoid it if at all possible.

The IRS most commonly charges the failure-to-file penalty against individuals who do not file tax returns simply because they’re unable to pay their tax bill. The reality, however, is that the failure-to-file penalty is much steeper than the failure-to-pay fee, so even if you cannot afford to pay your taxes, it is in your best interest to at least file your return.

The amount of the failure-to-file penalty varies depending on your total tax bill due, as well as the number of months for which your tax return is late. The penalty charged is 5% a month, with a maximum of 25% of the original tax amount owed.

A minimum fee is imposed against filers taxpayers who file their returns 60 days past the deadline. If you reach this threshold, the IRS will charge you a minimum of $135.00 or 100% of your total tax bill, whichever is smaller.

Failure-to-Pay Penalty

If you are unable to pay your tax bill when the filing deadline arrives, being aware of your options can help you to avoid costly failure-to-pay penalties. The most common way to avoid this fee is to set up an IRS installment plan. You can set up your tax payment plan on the IRS website or by calling the IRS directly.

Keep in mind that even if you file for and receive a tax filing extension, the IRS does not grant you an extension to pay your tax bill. When filing for an extension, you must make a fairly close estimate of how much money you owe the IRS and submit a payment for this amount with your filing extension request. As long as you pay at least 90% of the actual amount due – and pay the remainder of your balance with your tax filing on or before your extended due date – you will not be assessed any late penalty payment fees.

If you do not to pay your tax bill on time, the amount of your penalty fee will be calculated monthly at ½ of 1% of your total bill due, with a maximum penalty of 25%.

Fees for Not Paying Enough in Estimated Payments

If you are a contract employee, own your own business, or for some other reason do not have taxes withheld from your paycheck, you will need to make estimated tax payments on a quarterly basis. If you fail to pay on time or do not pay enough in quarterly payments, you risk being charged with an IRS penalty.

Penalty Fees for Negligence

According to the IRS, negligence with regard to taxes is defined as an individual intentionally disregarding IRS rules when filed his tax return. If the IRS can reasonably prove that the taxpayer was either careless or reckless when filing his tax return, then penalty fees for negligence can be charged, which is typically calculated as 20% of the net understatement of tax.

The Substantial Understatement Penalty Fees

The IRS charges substantial understatement penalty fees against taxpayers who greatly underestimate the amount of money that they will owe on their tax returns. To be hit with this fine, one must be caught underestimating his tax liability by 10% of the total tax bill or by $5,000.00, whichever is less.

Manny Davis

Manny Davis

I am a tax accountant with over 10 years experience helping taxpayers with tax liens, wage garnishment, tax audits, IRS penalties, and more. Visit my site at