What is the penalty for filing a late return without an extension?

What is the penalty for filing a late return without an extension?

• A. 2% of the unpaid tax amount per month
• B. 5% of the unpaid tax amount per month
• C. 10% of the unpaid tax amount per month
• D. 25% of the unpaid tax amount per month

Answer: (B)

The penalty for filing a late return without an extension is 5% of the unpaid tax amount for each month or part of a month that the return is late. This penalty accrues for a maximum of five months, which can significantly increase the total amount owed if the return is not filed promptly. Understanding this concept is crucial for taxpayers, as timely filing can prevent these additional costs. The penalty rate reflects the IRS's approach to encourage prompt compliance with tax filing obligations. Therefore, if a taxpayer files their return late, even if they cannot pay the owed tax immediately, they must be aware of this percentage that compounds over time, impacting their financial situation.

The penalty for filing a late return without an extension is 5% of the unpaid tax amount for each month or part of a month that the return is late. This penalty accrues for a maximum of five months, which can significantly increase the total amount owed if the return is not filed promptly.

Understanding this concept is crucial for taxpayers, as timely filing can prevent these additional costs. The penalty rate reflects the IRS's approach to encourage prompt compliance with tax filing obligations. Therefore, if a taxpayer files their return late, even if they cannot pay the owed tax immediately, they must be aware of this percentage that compounds over time, impacting their financial situation.