The Internal Revenue Service on June 9, 2022 advised taxpayers who missed the April tax deadline that they can usually avoid a larger penalty by filing their 2021 federal income tax return and paying any tax due by Tuesday, June 14.
To avoid the larger penalty, the IRS must receive the return by June 14. This means that a return mailed on that date will not qualify. For that reason, the IRS urges everyone to file electronically by June 14.
In addition, taxpayers can also limit late-payment penalties and interest charges by paying their tax electronically. The fastest and easiest way to do that is with IRS Direct Pay, a free service available only on IRS.gov. Several other electronic payment options are also available. Visit IRS.gov/Payments for details.
How the penalty works
Those who miss the June 14 cutoff will normally face a minimum late-filing penalty, also known as a failure-to-file penalty. By law, If the return is more than 60 days late, the minimum penalty is either $435 or 100 percent of the unpaid tax, whichever is less. This means that the penalty will equal the tax due if the taxpayer owes $435 or less. If they owe more than $435, then the minimum penalty will be at least $435.
Under the normal calculation, this penalty is 5% of the unpaid tax for each month or part of a month that the return is late, up to a maximum of 25%. Visit IRS.gov/Penalties for details.
The late-filing penalty will stop accruing once the taxpayer files. In addition, the separate late-payment penalty and interest will stop accruing as soon as the tax is paid. The taxpayer need not figure any of these charges. Instead, the IRS will bill them for any amount due.
Other filing deadline rules
Some taxpayers get more time to file, even if they didn’t request an extension. These special deadlines affect penalty and interest calculations for those who qualify, such as members of the military serving in combat zones, taxpayers living outside the U.S. and those living in declared disaster areas.
Combat zone taxpayers
Military service members and eligible support personnel serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any tax due. A complete list of designated combat zone localities can be found in Publication 3, Armed Forces’ Tax Guide, available on IRS.gov.
Combat zone extensions also give affected taxpayers more time for a variety of other tax-related actions, including contributing to an IRA. Various circumstances affect the exact length of the extension available to taxpayers. Details, including examples illustrating how these extensions are calculated, are in the Extensions of Deadlines section in Publication 3.
Taxpayers outside the United States
U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico have until June 15, 2022, to file their 2021 tax returns and pay any tax due.
The special June 15 deadline also applies to members of the military on duty outside the U.S. and Puerto Rico who do not qualify for the longer combat zone extension. Affected taxpayers should attach a statement to their return explaining which of these situations apply.
Though taxpayers abroad get more time to pay without penalty for late payment, interest is due on any unpaid tax from this year’s April 18 deadline. The interest rate is currently 4% per year, compounded daily. The interest rate rises to 5% on July 1, 2022. For more information about the special tax rules for U.S. taxpayers abroad, see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, on IRS.gov.
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in a federally declared disaster area when at least one area qualifies for FEMA’s Individual Assistance program. Ordinarily, this means that taxpayers need not contact the IRS to get disaster tax relief. For details on all available relief, visit the Around the Nation page on IRS.gov.
Penalty relief for some
Taxpayers who have filed and paid on time and have not been assessed any penalties for the past three years often qualify to have the penalty abated. See the First-Time Penalty Abatement page on IRS.gov. A taxpayer who does not qualify for this relief may still qualify for penalty relief if their failure to file or pay on time was due to reasonable cause and not willful neglect. Anyone who receives a penalty notice from the IRS should read it carefully and follow its instructions for requesting relief. See Penalty Relief in IRS.gov for the types of penalty relief and how to make the request.
In addition to penalties, interest will be charged on any tax not paid by the regular April due date. For individual taxpayers, it’s the federal short-term interest rate plus 3 percentage points. This means that until June 30, the rate is 4% per year, compounded daily. Starting July 1, 2022, through September 30, 2022, the rate will be 5% per year, compounded daily. Interest rates are subject to change quarterly.
Interest stops accruing as soon as the tax is paid in full. By law, interest cannot be abated.
Ways to pay
Many taxpayers mistakenly delay filing because they are unable to pay what they owe. Often, these taxpayers qualify for one of the payment options available from the IRS. These include:
• Installment Agreement – An installment agreement, or payment plan, allows a taxpayer to pay over time. Individuals who owe $50,000 or less in combined tax, penalties and interest can request a payment plan using the IRS’s Online Payment Agreement application.
Those who have a balance under $100,000 may also qualify for a short-term payment plan of up to 180 days. The plan can be set up in minutes and requesters receive immediate notification of approval. To reduce the chance of default and avoid having to write and mail a check each month, taxpayers can select the direct debit option for making these payments. For other ways to set up a payment plan, visit Payment Plans, Installment Agreements.
• Offer in Compromise — Some struggling taxpayers may qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool.
Taxpayers who owe tax for 2021 can avoid having the same problem for 2022 by increasing the amount of tax withheld from their paychecks. For help determining the right amount to withhold, use the Tax Withholding Estimator on IRS.gov.