How To Avoid Late Payment Penalty IRS
To avoid a late payment penalty from the IRS, it’s crucial to pay your taxes on time—even if you can’t file your return yet. The IRS charges penalties for both late filing and late payment, but the late payment penalty specifically can be avoided by following these steps:
✅ How to Avoid IRS Late Payment Penalty
1. Pay Your Taxes by the Due Date
- The IRS due date is typically April 15 (or the next business day).
- Even if you file an extension, your payment is still due on April 15.
- Pay at least 90% of what you owe by the deadline to avoid the penalty.
2. File on Time or File for an Extension
- If you can’t file by April 15, file Form 4868 for a 6-month extension.
- But remember: the extension is only for filing, not paying.
3. Use IRS Direct Pay or EFTPS
Avoid mailing delays by paying online:
- IRS Direct Pay: Free and direct from your bank account.
- Electronic Federal Tax Payment System (EFTPS): Secure option for businesses and individuals.
- Payments are recorded immediately or within 24 hours.
4. Estimate and Pay Early If Unsure
If you’re unsure how much you owe:
- Estimate conservatively and pay a bit more.
- Overpayments will be refunded after you file.
- Underpayments can lead to penalties and interest.
5. Set Up a Payment Plan If You Can’t Pay All
- Apply for an IRS installment agreement online or with Form 9465.
- You may reduce or eliminate penalties if the plan is approved and you make payments on time.
- Interest still applies, but penalties can be avoided or reduced.
6. Check for Penalty Relief
You may qualify for penalty relief if:
- You’ve filed and paid on time for the past 3 years.
- You experienced hardship (medical emergency, natural disaster, etc.).
- File Form 843 to request a first-time penalty abatement or reasonable cause relief.
7. Keep Records of All Payments
Always:
- Save payment confirmations.
- Monitor your IRS account for posting accuracy: IRS View Your Account
📝 Summary Table
| Strategy | Why It Helps |
|---|---|
| Pay by April 15 | Avoids the 0.5% monthly late payment penalty |
| File an Extension (Form 4868) | Avoids late filing penalty (but not payment penalty) |
| Pay Online (Direct Pay/EFTPS) | Faster, secure, and immediate proof |
| Estimate and Prepay If Unsure | Reduces risk of underpayment |
| Set Up Installment Agreement | Avoids penalties if approved and maintained |
| Request Penalty Relief (Form 843) | Waives penalties for first-time or hardship cases |