Significance

• Penalties and interest are added to tax owed as a consequence for not complying with IRS guidelines.
  
  

Penalties

• The failure to file penalty is 5 percent of the tax owed for each month the return is late, and the failure to pay penalty is 1/2 of 1 percent for each month the tax is unpaid.
  
  

Interest

• Interest on tax debt owed compounds daily, and the rate of interest varies from quarter to quarter. To determine the current interest on your tax debt, visit irs.gov.
  
  

Considerations

• While IRS interest cannot be removed, taxpayers can complete IRS Form 843 to request an abatement of penalties. The IRS will consider requests based on what it defines as a reasonable cause, i.e. illness, incarceration, military service, overseas travel, etc.
  
  

Warning

• Failure to pay the full amount of tax debt owed, plus penalties and interest accrued, can result in a lien or levy being placed on your assets. A lien is a legal claim to a taxpayer's property while a levy is an actual seizure of property to pay back taxes owed.