U S Taxation, 2026: Penalties for late filing of returns/ paying taxes

It is a common knowledge that for 1040 tax returns, the last date for filing of tax returns is April 15,2026 for 2025 tax year. Let us recollect the last dates for filing of tax returns for other categories as under: for form 1065, the last date is 15^th date of the third month after the end of the partnership’s tax year. It is March 15^th for a calendar year partnership. The same is also applicable to a limited liability company. (LLC). Form 1120-S is due by the 15^th day of the third month following the end of the corporation’s tax year which is March 15, for a calendar year corporation.

A Corporation must file its Form 1120 by the 15^th of the 4^th month after the business year which is 15^th April for a calendar year corporation.

The last date to file a US gift tax return (Form 709) is generally April 15 of the year following the gift. For gifts made in 2025, the deadline is April 15, 2026. You can file for an automatic 6-month extension, making the extended deadline October 15, 2026.

But the required taxes should be paid by the due dates prescribed.

What are tax penalties for late filing and late payments too?

Let us talk of underpayment penalty.

An underpayment penalty is a charge the IRS imposes on taxpayers who did not pay all of their estimated income taxes for the year or paid their taxes late. You’ll face an underpayment penalty if you:

• Didn’t pay at least 90% of the tax on your current-year return or 100% of the tax shown on the prior year’s return.
• Paid your estimated taxes late.

If you work for an employer, you may be hit with this penalty because the tax that was withheld from your pay check during the year didn’t cover your full tax liability. If you’re an independent contractor, you may be penalized for missing or underpaying one of the quarterly estimated tax payments.

This penalty only applies to those who owe $1,000 or more in unpaid taxes. If you’re subject to this charge, you’ll receive an IRS notice in the mail.

Of course, there are special rules for taxpayer whose adjusted gross income for the previous year was more than $150,000(or $75,000 if married filing separately)

Rather than 100%, you must have paid 110% of the tax on your prior year’s return to avoid the underpayment penalty.

What is the underpayment penalty to be levied by IRS?

The underpayment penalty is calculated by multiplying how much tax you owed for each quarter by the interest rate for that quarter.

This quarter (April through June), the underpayment penalty interest rate is 6%, a decrease of one percentage point from the previous quarter. The details for other quarters are as under.

Can a taxpayer avoid the tax penalty by improving the tax deducted?

Yes, if he has paid at least 90% of the tax on the current-year return or 100% of the tax shown on the prior year’s return, the underpayment penalty for estimated taxes can be avoided.

Another way to avoid an underpayment penalty in the future is to adjust the withholdings on the W-4 from the employer. Reducing the number of dependents or adding an extra withholding amount on line 4(c) can help to ensure enough withholdings.

One can easily use the IRS withholding estimator to check the required amount.

If you’re an independent contractor who pays quarterly estimated taxes, stay on top of each quarter’s due date, and make sure you’re accurately calculating and paying what you owe to avoid the underpayment penalty.

Exceptions to the underpayment penalty

The IRS may waive an underpayment penalty under certain circumstances, such as if you:

• Had the majority of your income tax withheld at the beginning of the year.
• Have varying income throughout the year.
• Became disabled and had reasonable cause to underpay.
• Retired in the past two years after reaching age 62 and had reasonable cause to underpay.
• Went through an unforeseen circumstance, such as a local disaster or a casualty.
• Are a farmer or fisherman who paid all tax due by March 1.

What will happen if you don’t file the tax return liability on time?

You may still consider filing your tax return, even if you can’t afford to pay your bill. The IRS imposes a failure-to-file penalty on taxpayers who file late or don’t file, which is typically 5% of any unpaid taxes, up to a maximum of 25%.

It’s also a good idea to pay as much as you can when you file.

Additionally along with the underpayment interest charge, the tax payer could face a late-payment penalty (also sometimes called the failure-to-pay penalty).

This is an additional charge of 0.5% of any unpaid taxes for each month or partial month the tax goes unpaid, capped at 25% of your tax bill.

If this all sounds a bit overwhelming, there is some good news:

There may be umpteen reasons which stop me to pay the required taxes on time. Can IRS, in any way help me to pay on instalment basis?

The IRS offers payment plans that allow taxpayers to pay their bill over time. Getting on a payment plan can help reduce penalties (for instance, the late-payment penalty is cut in half), and it can prevent a tax levy or lien.

Let us learn IRS payment plans, if any.

Let me help you with details, in simplified terms from their web site.

https://www.irs.gov/payments/payment-plans-installment-agreements#plandef

“What is a payment plan? (updated March 3, 2026)

A payment plan is an agreement with the IRS to pay the taxes you owe within an extended timeframe. You should request a payment plan if you believe you will be able to pay your taxes in full within the extended time frame. The IRS now offers Simple Payment Plans for individuals and businesses. If you qualify for a short-term payment plan you will not be liable for a user fee. Not paying your taxes when they are due may cause the filing of a Notice of Federal Tax Lien and/or an IRS levy action”

In a simple way to understand,

Simple Payment Plans are long-term payment plans available for qualified taxpayers. They don’t require a collection information statement, lien determination, or trust fund recovery penalty determination.

More than 90% of individual taxpayers will qualify for a Simple Payment Plan.

Generally, how to qualify?

All applicants for a Simple Payment Plan must be current with all filing and payment requirements. This indicates UpToDate filing of tax returns.

 For Individuals

• $50,000 or less in assessed taxes, penalties, and interest

Businesses

With trust fund taxes:

• $25,000 or less in assessed taxes, penalties, and interest, or
• $50,000 or less in assessed taxes, penalties, and interest for an out-of-business sole proprietorship

Without trust fund taxes:

• $50,000 or less in assessed taxes, penalties, and interest

If you do not qualify for a Simple Payment Plan, you may still qualify for another type of payment plan.

You may request your CPA to help or for information, the following details may help.

“How to apply

To apply for a Simple Payment Plan, sign in to your IRS account (individuals), call us at the number on your notice, or 800-829-1040 (individuals) or 800-829-4933 (businesses), or visit your local Taxpayer Assistance Center (TAC).”

The details are from IRS web site.

Terms

Most taxpayers have up to 10 years to pay off their balance due. However, the longer the payment plan term you choose, the more interest and penalties you will owe. Payment plans do carry a cost.

Payments

You can pay instalments on a Simple Payment Plan directly from your bank account with automatic withdrawals for a reduced setup fee, a one-time monthly payment through IRS Direct Pay, or with your debit/credit card, digital wallet, or cash through an approved third-party payment processor.

It is better to avail IRS payment plans and have mental peace provided the willingness to pay the overdoes are taken seriously and enough funds left in bank accounts invariably to meet the monthly demands from IRS.

Conclusion

Filing the tax returns or paying tax overdue are the most important activities particularly, when U.S.A. tax authorities have reinforced the implementations of their instructions, verification of the returns, and take strict actions on non- payment of taxes. It is not unusual if permanent residents while re- enter USA from some other country, are asked whether they file their tax returns regularly.

Let me conclude with the message from IRS authorities.

“By law, the IRS may assess penalties to taxpayers for both failing to file a tax return and for failing to pay taxes they owe by the deadline.

If you’re not able to pay the tax you owe by your original filing due date, the balance is subject to interest and a monthly late payment penalty. There’s also a penalty for failure to file a tax return, so you should file timely even if you can’t pay your balance in full. It’s always in your best interest to pay in full as soon as you can to minimize the additional charges.

Benefits

• Avoid accruing additional interest and penalties
• Avoid offset of your future refunds
• Avoid issues obtaining loans

If you can’t pay the full amount due, pay as much as you can and visit IRS.gov/payments to consider our online payment options.”

Caution

My article, though has tried to give the correct information, does not constitute a tax consultation or a tax legal advice. One must consult a CPA or an advocate for consultation.