The failure-to-pay penalty is 0.5 percent of the unpaid tax per month or part of a month, up to 25 percent, reduced to 0.25 percent while an installment agreement is in effect and increased to 1 percent after a final notice of intent to levy.
Interest accrues on top of the penalty. Paying as much as possible by the original due date, even without the return, limits the damage.
Why it matters: the reduced rate inside an installment agreement is one of the reasons to formalize a payment plan rather than paying informally.
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