IRS Penalty: Failure To Pay
Internal Revenue Code (IRC) Section: §6651(a)(2)
Other Names This Penalty Is Called: Late Paying Penalty
How This Penalty Is Computed: .5% per month on the unpaid balance! This is roughly equivalent to an annual penalty rate of 6%. If the tax is due on April 15th, and the complete payment is made on April 16th, that is considered to be 1 month. The total percentage cannot exceed 25%.
There can be variations on the .5% per month rate, but those variations are not particularly common.
If the IRS is also assessing a Failure To File penalty for the same month, the Failure To Pay penalty will reduce the Failure To File penalty.
When Does Interest Start To Run On This Penalty: Interest runs on this penalty from the date the IRS assess the penalty if the taxpayer does not pay the penalty within 10 days.
How To Get Out Of This Penalty: Prove to the IRS that the penalty should be abated due to "reasonable cause".
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It is our experience that tax professionals have better luck at getting IRS penalties abated. If you work with a tax professional, we strongly recommend that you contact them about any IRS penalty issues. It should also be pointed out that no one can guarantee that an IRS penalty will be abated. You don't know that your plea for penalty abatement will work until you have an IRS letter stating that they will abate the penalty!
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We also consult on IRS penalty abatement issues and IRS penalty computations. You are welcome to call us at 1-800-326-6686.