FAILURE TO PAY TAX

Separate  penalties apply for failing to pay and failing to file. The failure to pay  penalty the “gentler” of the two, running at 1/2% for each month (or part of a month) the payment is late. For example, if payment is due April 15 and is made May 20, the  penalty is 1% (1/2% times 2 months (or partial months). The maximum  penalty is 25%.

The failure to pay penalty is based on the amount shown as due on the return (less credits for amounts already paid, e.g., via withholding or estimated payments), even if the actual tax bill turns out to be higher. On the other hand, if the actual tax bill turns out to be lower, the penalty is based on the lower amount.

For example, if your payment is two months late and your return shows that you owe $5,000, the penalty is 1% (see above), which equals $50. If you are audited and your tax bill increases by another $1,000, the failure to pay penalty is not increased because it's based on the amount shown on the return as due. On the other hand, if the audit reveals that your tax due should have only been $4,000, the penalty is reduced to $40.