Federal taxes are due one week from today. How ready are you?

Plenty of Americans miss the tax deadline every year. Others file, only to discover they owe taxes and can't afford to pay. If you're one of them, unfortunately, you could end up owing tax penalties.

For simplicity's sake, let's assume that you do owe federal taxes and this is the first time you've had trouble filing on time or paying them. The two penalties you could encounter are the failure-to-file penalty and the failure-to-pay penalty.

It may surprise you to learn that the penalties for filing late are quite a bit higher than those for filing on time, even when the same amount in taxes is due. Here's how the IRS generally calculates the penalties for those who owe taxes:

  • Missed the deadline for filing or extension: A penalty of 5 percent of your unpaid taxes for every month or partial month your taxes remain unpaid. However, the total penalty can't exceed 25 percent of the taxes due.
  • Filed on time but didn't pay: A penalty of only 0.5 percent of your unpaid taxes or every month or partial month until your taxes are paid. Again, the total penalty can't exceed 25 percent of your unpaid taxes.
  • Missed the filing or extension deadline by over 60 days: A penalty of $135 or 100 percent of the taxes due, whichever is smaller.

For those who both failed to file and didn't pay, the overall penalty is slightly reduced -- the 0.5-percent failure-to-pay penalty is used to reduce the 5-percent failure-to-file penalty.

You may avoid the failure-to-pay penalty altogether if:

  • You filed a request for an extension by the original tax deadline,
  • You paid at least 90 percent of your taxes by the original tax deadline, and
  • You pay the entire balance by the extension deadline.

Finally, the IRS will give you a break in certain, rare situations. All you have to do to avoid both kinds of penalties is prove to the IRS that your failure to file or pay was reasonable and not caused by your own willful neglect of your responsibilities.

Filing your taxes is generally best, even if you can't pay in full. The IRS can work with you, including by offering flexible payment plans and offers in compromise. An unusual or unexpectedly large unpaid tax bill, however, calls for the assistance of a tax lawyer.

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