IRS Updates Penalties for Late Tax Returns in 2024: What You Should Know

Uncle Sam doesn’t take kindly to dishonesty. So, if you try to double-cross the IRS, be prepared to pay up.

Find Out: The 7 Worst Things You Can Do If You Owe the IRS
More: What To Do If You Owe Back Taxes to the IRS

Many common IRS penalties increase each year, and 2024 is no exception. On top of that, the IRS also charges interest on penalties, which increases the amount you owe until your balance is paid in full.

Here’s a look at some of the most common IRS penalties for late tax returns in 2024.

5 IRS Penalties for 2024

1. Failure to File a Tax Return

Not filing a tax return is an expensive mistake. The late filing penalty is 5% of your unpaid taxes for each month your return is late, up to a maximum of 25%. In 2024, if your tax return is not filed within 60 days of the due date, you’ll be charged a minimum late-filing fee of $510 or 100% of taxes owed, whichever is lower.

2. Failure to Pay

Not paying taxes when they’re due will earn you a penalty in the form of a percentage of your unpaid taxes.

Specifically, the penalty is based on the amount of time your overdue taxes remain outstanding. This number will not exceed 25% of your unpaid taxes. For failing to pay the amount shown as tax on your tax return, you’ll be penalized 0.5% of the unpaid taxes for each month or part of the month the tax remains unpaid.

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3. Information Return

Those engaged in a trade or business who do not file an information return or payee statement by the due date will have to pay up. If you provide the information up to 30 days late, you’ll be penalized $60. That amount rises to $120 for 31 days late through Aug. 1, increasing to $310 after Aug. 1 or if you don’t file at all. If it’s determined you intentionally disregarded this task, you’ll be fined $630.

4. Accuracy-Related Penalty

Underpaying the tax required to be shown on your return — such as not reporting all of your income or claiming deductions or credits you don’t qualify for — will cost you. For individuals, understating your tax liability by 10% of the tax required to be shown on your tax return or $5,000 — whichever is greater — is considered a substantial understatement.

If it is determined this issue arose from negligence or disregard of the rules or regulations, you’ll be penalized 20% of the portion of the underpayment of the impacted tax.

5. Erroneous Claim for Refund or Credit Penalty

Prepare to pay a penalty if you submit a claim for a tax refund or credit of income tax for an unwarranted amount and reasonable cause does not apply. The penalty amount is 20% of the excessive amount claimed.

What You Can Do If You Owe Back Taxes?

Considering you now know the cost of common IRS penalties, you might feel panicked if you have unpaid taxes. You’re certainly not alone with this problem. You have several options. First, you may want to reach out to a professional. Some tax resolution companies, such as Tax Relief Advocates, will give you a free consultation where they’ll review your specific situation and propose a path forward.

You second choice is to tackle the situation on your own. If you choose to take this route, here is some advice to take control of the situation:

1. File a Return

No matter what, you always need to file your tax return by the deadline. Pay as much as you’re able to right now, to minimize the interest and penalties you’ll incur.

2. Request a Short-Term Extension to Pay

Apply for a short-term payment plan if the amount of back taxes you owe is less than $100,000 in combined tax, penalties and interest. The application can be completed online, and if your request is granted — you’ll be notified immediately if you’re approved — you’ll have 180 days to pay your balance in full.

3. Request an Installment Agreement

If you owe less than $50,000 in combined tax, penalties and interest, you may qualify for a long-term payment plan. Also known as an installment agreement, you’ll have 72 months to pay your tax debt under this option.

4. Apply for an Offer in Compromise

It’s possible there’s no way you can reasonably pay your back taxes. In this case, consider applying for an offer in compromise. If accepted, this will allow you to settle your tax debt for less than the total amount owed.

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This article originally appeared on IRS Updates Penalties for Late Tax Returns in 2024: What You Should Know

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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